In simple terms, life insurance is a legal contract between an insurance policyholder and an insurance company. The insurer promises to pay a named beneficiary a sum of money on the death of the insured person, in return for a (usually monthly) payment called the premium.
Choosing the length of cover you need
Many people buy life insurance to protect their families from having to deal with financial burdens if they were to die prematurely. Policies can be for a fixed period, referred to as term insurance, or for the rest of your life, when it’s called whole-of-life cover.
Types of policy available
There are three main types of policies that are often recommended. With level term life insurance, the cover remains constant throughout the term of the policy. With decreasing term insurance, the level of cover gradually reduces in line with the outstanding amount of your mortgage. The third type, whole of-life, doesn’t normally have an end date, so premiums are paid until you die, at which point the policy pays out (sometimes premiums end at a certain age, say 80, but cover continues until your death). If you want to cover your mortgage – which may typically last 25 years – or providea safety net for your family while they are growing up, then term insurance is usually more appropriate as it can be tailored to suit your needs and time horizon. If you want to leave money to your family beyond a fixed period, a whole-of-life-policy could be right for your needs. We can offer you all the advice you need to make the right choice, so do get in touch.
Your home or property may be repossessed if you do not keep up repayments on your mortgage.
Source: Intrinsic Quarterly Mortgages Q2 2018 ISSUE 8 “Life insurance in a nutshell – what you need to know”