Life insurance: it sounds like such a weighty responsibility. An undertaking that none of us want to have to think about, and yet which all of us will be forced to consider at some point. While it is reluctantly accepted that nothing lasts for ever in this life, that’s not to say we’re powerless to plan ahead. Life insurance is so-named for a reason – so that should the worst ever happen, our family will still be provided for. Life insurance is not only a sensible provision – it is a highly-advisable one.

As we grow older, and are faced with illness and failing health, life insurance is a provision we will naturally want to put in place. That’s not to say that life insurance should only be of concern to the elderly however – quite the opposite in fact. The sad truth is that unforeseen circumstances – including serious illness and occasionally death – can occur at any time. As a consequence, life insurance is a provision that every adult would do well to consider, if not for their sake, then for the sake of their family.

Life insurance provides for the worst-case scenarios we’d rather not think about. Far better to deal with such issues in the present however, so our families aren’t crippled with a financial burden in the future.

Life insurance can broadly be split into two categories: Term Insurance and Whole-of-Life Insurance. Term insurance is the cheapest and simplest type to obtain, so-named because the customer can choose the length of term they would like to be covered for. It could be five years; it could be 25. If you do pass away within this term, the insurance policy will pay out. Should you outlive the term however, the life insurance policy will no longer be valid. Some couples may elect to take out joint term insurance. Should one of them die during the course of the agreed term, the policy will pay out to the surviving partner.

Whole-of-life insurance, as you would expect, pays out the agreed sum upon death, whenever that may be. Because whole-of-life insurance will typically last longer than term insurance, it also tends to cost more. Provided you keep paying the premiums, the policy is valid for as long as you live.

Some insurers have policies specifically tailored to certain age or interest groups. Thus, there are a policies on the market, for example, designed for over 50s. In addition, many companies will offer Critical Illness Cover, either as a standalone policy or to bolt on to a conventional life insurance policy. It is not just death in a family that can be cataclysmic – serious illness can be equally devastating. Many families conclude that critical illness cover is a sensible provision to have in place, to account for medical treatment and loss of earnings. It is worth noting that certain serious conditions, such as cancer or heart defects, may not be covered under the terms of the policy, so check the small print prior to purchase.

The main reason for taking out a life insurance policy is to financially provide for people who depend on you. In most instances, this will be your immediate family.

Upon death, the insurance policy will pay out, either in a lump sum or in installments depending on the option you have selected. No one knows what the future may hold, which is why it’s prudent to prepare for the worst-case scenario. It doesn’t require a life insurance payout to vindicate having taken out such a policy; the mere knowledge that one is in place is reward in its own right for the peace of mind that it imparts. When the time comes for a life insurance policy to pay out, there are a number of advantages it can bestow.

Your outstanding debts will be cleared for a start, saving your next-of-kin from the burden of having to manage these. Similarly, if you are the main bread-winner in your household, life insurance can ensure that your family continue to receive an income that is commensurate with your salary. It is this security, of having every possible eventuality accounted for, that leads many to purchase life insurance.

The costs associated with dying are well-documented. Families who are struggling to come to terms with the loss that they have suffered don’t need their worries compounded by the uncertainty of wondering how they are going to pay for the funeral and burial or cremation costs. As we near the end of our lives, there may be mounting medical costs associated with imparting the level of care that is required. An insurance policy obviates the risk of your family being troubled by this expense. If your children are still of school age, life insurance can also ensure that their education will be taken care of. It is easy to see why many conclude that life insurance is an essential provision.

The price you pay on any life policy – be it term insurance or whole-of-life – will vary according a a number of factors. Some exclusions – including pre-existing illnesses and hereditary conditions – will be beyond your control. There are also lifestyle factors that will determine the final price you pay. In pricing the policy, the insurer is calculating the risk of them having to pay out prematurely. Thus, if you are a smoker or work in a dangerous profession, expect to pay a higher premium.

Similarly, because men have shorter life expectancies than women, their life insurance tends to cost more. Some life insurance policies will penalise you if you miss a payment – in fact the policy could be rendered void for failure to make a payment on the due date. While the temptation is to go for the cheapest policy you see advertised, check to see what provision is made for late payments. A policy that costs a little extra but allows for such eventualities may be a prudent choice.

As with choosing any sort of insurance, it pays to look around and obtain a number of quotations before reaching a decision. Prices can differ significantly between insurers, with policies that are purchased directly from the insurer’s website sometimes bestowing an additional discount. In addition, look out for special offers on life insurance that some companies occasionally run. Given that such promotions tend to operate for a limited time only, don’t delay if you find a life insurance deal that seems right for you.

Some insurance websites provide an online calculator to assist you with determining how much cover you require. You will be asked to answer a series of questions pertaining to your mortgage, outstanding loans and the standard of living your family are accustomed to.

From this information, it will be possible to calculate exactly how much your policy will cost. If your main concern is ensuring that your mortgage is paid off in the event of your death, the level of cover you require will naturally need to match your mortgage debt. Once you have factored in your various debts and the amount your family will require, it’s then a case of finding a policy whose options and price suits your needs. Some insurers recommend obtaining cover that equates to £150,000 per child. This figure may seem excessive, but it is worth bearing in mind that the cost of raising a child until 21 has been priced at over £200,000.

Some families elect to take out a policy that pays out a fixed amount per year rather than a lump sum. That way, it’s possible to select the amount you’d like your family to receive each year. If you chose to have it matched to your salary, for example, your family would continue to enjoy a comfortable standard of living. Obtaining a single lump sum has its benefits, not least because your family can then choose to spend or invest the money as they see fit.

With such a large payout, however, comes the obligation to spend it wisely. Otherwise, the money could end up running out before the kids have even completed their education. For couples who have a respectable retirement fund awaiting them, it may not be necessary to purchase whole-of-life insurance. They may elect to secure life insurance until the age of 65. Thereafter, should one partner die, the other will have their retirement fund to take care of them.

Some insurance websites provide an online calculator to assist you with determining how much cover you require. You will be asked to answer a series of questions pertaining to your mortgage, outstanding loans and the standard of living your family are accustomed to.

From this information, it will be possible to calculate exactly how much your policy will cost. If your main concern is ensuring that your mortgage is paid off in the event of your death, the level of cover you require will naturally need to match your mortgage debt. Once you have factored in your various debts and the amount your family will require, it’s then a case of finding a policy whose options and price suits your needs. Some insurers recommend obtaining cover that equates to £150,000 per child. This figure may seem excessive, but it is worth bearing in mind that the cost of raising a child until 21 has been priced at over £200,000.

Some families elect to take out a policy that pays out a fixed amount per year rather than a lump sum. That way, it’s possible to select the amount you’d like your family to receive each year. If you chose to have it matched to your salary, for example, your family would continue to enjoy a comfortable standard of living. Obtaining a single lump sum has its benefits, not least because your family can then choose to spend or invest the money as they see fit.

With such a large payout, however, comes the obligation to spend it wisely. Otherwise, the money could end up running out before the kids have even completed their education. For couples who have a respectable retirement fund awaiting them, it may not be necessary to purchase whole-of-life insurance. They may elect to secure life insurance until the age of 65. Thereafter, should one partner die, the other will have their retirement fund to take care of them.

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