What is life insurance?
Life insurance means that you can leave money behind for your loved ones when you pass away. This money can be used to support them in whatever way.
Life insurance is usually paid out monthly to your life insurance provider. The cost of your insurance is entirely dependant on a number of factors. Which include your age, lifestyle and health. Also the type of cover you need will all be contributing factors to the cost of your plan.
The different types of life insurance
Term assurance is a simple form of life insurance. Essentially term assurance means that you can choose the amount you want to be covered for. As well as the period of time you wish to be covered for.
It is important to note that if you don’t die within the specified frame of time, you will not receive any form of pay out. And as well as this, any amount of money you have paid during this period will not be refunded to you. However, if you do die during this specified period of cover. Your beneficiaries will be entitled to a pay out. The amount can differ depending on your policy.
There are 3 types of assurance available.
Level Term – This entitled beneficiaries to a pay out if you die within the specified amount of time.
Increasing Term – as the name mentions, the amount of money you are covered for will actually increase during the specified period.
Decreasing Term – Think of this as the opposite of increasing term. Decreasing term means that the amount you are covered for will decrease over time. This is usually to pay off debts.
Whole of life policies
These policies are usually long term policies that pay out when you die, no matter when that may be. However it should be noted that these policies do tend to be more expensive as they can cover your entire life span from the moment this policy is taken out.
Family income benefit policies
Instead of a one time lump sum payment. Family income benefit policies pay your beneficiaries, usually monthly. Until the policy expires. Of course this is only if you die.
Can I choose who receives the money?
For the most part, you will be able to choose who receives the money. But this is only true if you have made the right arrangements.
If you have joint life insurance, the the money will go to the remaining policy holder when you die, and vice versa.
However, if you have taken out a single policy. You will have to make sure you have made prior engagements before death, in order for your money to go to where you want it to. This can be done by choosing beneficiaries. You could also place it into a trust. This can help you avoid being taxed on your pay out, meaning more of your money will go to your loved ones. As well as this, your money will reached your beneficiaries much more quickly.
Do you need life insurance?
Of course this all depends on your own circumstances. Think about your income and if you can afford the plan that you want. However, a plan can help give your beneficiaries financial peace of mind in events of your death, such as helping family pay off existing debts such as mortgages or finance plans.