A beginner’s guide to life insurance
Often overlooked, especially if you’re young and healthy, life insurance can be key to ensuring financial security for your family. Let’s explore what it is, the different types available and the process of taking out a policy.
What is life insurance?
Life insurance is a contract between you and an insurer. It works in the same way as car and home insurance but in this case, the protected subject is you. In exchange for making regular payments to the insurance company, your beneficiaries will receive a lump sum in the event of your death.
We’re rarely prepared for emergencies, and no one wants to imagine the possibility of sudden loss. A life insurance payout can therefore be an essential safety net, helping your family to cover funeral expenses, pay off debts and maintain the same standard of living.
Many people mistakenly believe life insurance is only necessary if you’re older or have significant health issues, but it can be a sensible financial safeguard for all adults.
Types of life insurance
There are several types of life insurance available, and the right policy will depend on your unique situation and needs:
- Term life insurance – coverage for a specific period, often 10 or 20 years. This type of policy is often more affordable and straightforward than other kinds of coverage.
- Whole of life insurance – with this policy, your beneficiaries will receive a lump sum regardless of when you pass away. Payments are usually higher and often made in an investment format, but this can be useful for estate planning.
- Critical illness cover – to be added to an existing life insurance policy or purchased separately, critical illness cover will pay out should you be diagnosed with a specific serious health problem. This can help you afford vital treatments and care.
- Over 50s life insurance – an over 50 life insurance policy is one of the most popular options for those in the applicable age bracket as typically you’re guaranteed to be accepted without a medical examination.
Combined policies are available for families and couples too such as joint life insurance and family income benefit which is paid out in instalments.
Choosing the right policy
Start by assessing your situation. Consider your age and health, dependents and any other financial obligations. This will reveal the policy details you need as well as any additional benefits not usually included as standard. You can also make exclusions of aspects you don’t need to make the coverage more affordable.
You can find coverage calculators and policies to compare by searching online or speaking to a trusted financial advisor who knows your situation.
Applying for life insurance
Most companies have a fairly straightforward process for applying for life insurance. Often it’s simply a case of filling out forms and providing supportive information. Sometimes your insurer will ask you to complete a medical examination which you can do for free through the NHS if you’re aged between 40 and 75.
All information provided should be kept confidential. It is simply a way for the insurers to evaluate your health history, current lifestyle and occupation.
