Why should I purchase life insurance?
Many insurance police focus on protecting either your property or yourself. Life insurance protects individuals who rely on you financially. If you become seriously ill or die, this coverage insulates them from financial losses. In addition, mortgage lenders may require life insurance as reassurance that the mortgage will be repaid if you should die before the mortgage is paid in full.
But, I am young and healthy—is life insurance really worth it for me?
The key factor when deciding to buy life insurance is not age or even health. It is whether an individual will suffer a financial loss as a result of your death. If you support a family, surviving members may be unable to make mortgage payments or pay household bills. If you have a joint mortgage with a partner, that individual relies on at least part of your income to pay the mortgage. It makes sense to get a life insurance policy if someone else relies on you for financial support, regardless of your age or health status.
Does life insurance only pay for the mortgage?
A mortgage is the most costly expense for many consumers and many life insurance policies are designed to cover it. A basic term life policy is suitable for coverage that lasts through the mortgage term. Decreasing term insurance is an alternative coverage with a benefit that declines over time to mirror the declining mortgage balance. Other life policies are designed to cover different expenses or the combined total of the mortgage and other expenses.
If I already have life insurance, is there any reason to purchase another policy?
During the past decade, life insurance costs have declined substantially. If you took out a life policy several years ago, you may be able to drastically lower the premium while maintaining the coverage level. However, this may require to you to change insurance companies. An in-depth review of the available coverage is recommended and our company offers this service at no charge.
What types of life insurance are available?
The two major categories of life insurance are term and whole life. Term policies provide only financial protection, while whole life policies are also investments.
Why do some insurers refer to term insurance as “temporary” insurance?
The reason some insurance companies use the word “temporary” is because term insurance only offers coverage for a fixed timeframe, referred to as the term, not during the entire lifetime of the insured. If the insured dies outside of the term, no benefit is paid.
Are there separate classifications of term insurance?
Yes, increasing term, increasable term, and decreasing term are three common types of policies. Both increasing and increasable term consider increased costs that you may want to cover during the policy period. Premiums for increasing term policies automatically increase by a pre-determined amount. The increase may be determined by inflation levels or could be a fixed percentage annually.
An increasable term policy allows the insured to select the situations that would trigger a premium increase, such as when a certain event occurs or on the policy anniversary date. With both increasing and increasable term policies, the coverage amount increases proportionately with the premium. As an example, if the insurance policy is for £200,000 and the premium increases by five percent, the coverage will also increase five percent to £210,000.
At the other end of the spectrum is decreasing term life insurance. With this policy, premiums are reduced over time, with the benefit also decreasing. People typically take decreasing term life to protect mortgage payments. As the mortgage balance decreases each month, the insurance benefit declines. A lender may require you to obtain life insurance coverage before it approves a mortgage.
When determining the coverage level, should I consider funeral costs?
It is wise to account for funeral costs when determining the total life insurance benefit. Separately available pre-paid funeral plans are often much more expensive.
Is there a life insurance policy that pays out monthly income for an extended period instead of a lump-sum benefit?
Yes, and it is usually referred to as a family income benefit policy. This coverage pays a monthly sum to your beneficiaries to replace your wages should you die, or with some policies, if you become seriously ill. Since the benefit is paid over time rather than all at once, this type of policy typically has a lower premium than a lump sum benefit policy.
What situations prevent a life policy payout from occurring?
Death caused by a situation that the insured knew of but did not relay to the insurance company could nullify the benefit. For example, if the individual was a smoker but claimed to be a non-smoker when taking the insurance policy, a claim may not be paid. In addition, death by suicide usually voids an insurance payout.
