Types of Life Insurance

There are two basic forms of life insurance:

Term Insurance – a policy arranged for a fixed number of years.

Whole of Life – A policy that is ongoing until death or the premiums cease.

Term insurances are often taken out to provide a family with financial protection in the event of one or both of the parents dying. This should allow for sufficient funds to be made available to pay a family’s accommodation, school fees and living expenses.

A decreasing term insurance, sometimes called a mortgage protection plan, is often taken out to cover mortgages or loans. This is one of the most common types of life insurance. As the mortgage repayments are made the loan decreases, therefore the amount of cover also decreases to reflect this change.

Key-man insurance is often taken out by companies to cover them against the death of a key member of staff. This cover would pay out a lump sum enabling the company to support the business at a difficult time until that skill set can be replaced.

Savings Life insurance

Savings plans can be used to put away amounts of money which accrue interest or increase in value when placed in appropriate investments. These policies provide a cash lump sum on maturity or a fixed lump sum should the policy holder die prior to maturity.

Pension plans are tax efficient and should be considered in view of the amounts people are receiving through state pensions. They provide additional funds in the retirement years.

Many life policies can be extended to cover critical illness and total disability at an extra cost, so it may be worth speaking to your insurance representative.

General

Life insurance is not compulsory by law although banks and mortgage lenders often insist on one to protect their interest in a loan. Don’t always opt for the lenders offering, they are usually expensive.

Medicals will be necessary in some cases. These are dependent on age and the amount of cover required. The cost of the medical is usually paid for by the insurer.

Insurers usually have some form of exclusion for suicide to dissuade people from taking out insurance with this intention in mind.

With the cost of funerals increasing many insurers are providing additional cover for funeral expenses, these are relatively inexpensive and very easy to arrange.

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