There
are various types of life insurance. However the principle
for each variation is the same. In the event of your death
your dependents will receive a sum of money in compensation
ie as replacement for your earning power.
Why bother?
You
only really want to consider paying for life insurance if you have
children or others who are very reliant on you bringing home the
bacon. If you're a singleton and someone suggests you need life
insurance, then simply consider why you should bother? OK if you're
the only earning child of parents whose pension arrangements won't
keep them in comfort for ever, then go for it.
Otherwise
you could always get insurance to pay for a huge wake - if you've
got that sort of sense of humour
Unless
you've got dependents or another good reason to have it, be
wary. Life insurance is one of the few remaining ways for
IFAs and brokers to make very big commisions.
You
decide on a sum insured and a term of years from the outset.
The
sum insured remains constant throughout the term.
The
plan has no investment content.
If
you die during the specified term then the sum insured is
paid out.
Can
be set up as a single life plan, insuring one life for a
predetermined sum insured and term.
May
also be set up as a Joint life first death plan where the
sum insured is payable on the first death.
Critical
Illness benefit can be added to most plans where the benefit
is paid on either death or a critical illness whichever
should occur first.
Terminal
Illness benefit is normally payable on most policies during
the term of the policy, this usually excludes the last 18
months of the policy term.
As
soon as the sum insured is paid out the plan ceases. If
you survive the term and the sum insured has not become
payable then the plan ceases and nothing is paid out.
Life insurance Buying Tips
Life
insurance gets more expensive the older you are. You
probably want to buy level term assurance. This fixes
how much you pay - and how much your beneficiaries will receive.
The benefit is that you wont be stung for a large
premiumwhen you're
older. The downside is that the amount your
beneficiaries receive will decrease with inflation. (If you
shop around you should be able to find policies that will
offer inflation proof payout schemes).
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