life insurance guide
What is Life Insurance?
Life Insurance is a legal contract between policy holder and insurer where the insurer agrees to pay out a sum of money in the event of the policy holder's death. The main purpose is usually to protect any dependents from financial hardship. In return for this the policy owner usually pays an agreed premium at regular intervals.
Do I need Life Insurance?
It depends if you want or need that security. By definition the benefits of the types of Life Insurance are self explanatory but they will require investment from you. Is it something you really need? Think what your level of priority is. For many Life Insurance is an important commitment to their family but you had to be able to afford it. If you do require life insurance you should consult with a specialist life insurance advisor, such as Moneyscreen. Ask yourself this, If I died suddenly this morning would my current arrangements take care of my dependants and would all my debts be repaid? If the answer is no, you really should consider a life Insurance consultation.
Where Is The Small Print?
When you buy Life Insurance you will receive a Policy Document which sets out the full terms and conditions of your policy and also a Policy Handbook containing background information and explanations about your life insurance. As with any legal contract ensure you have read and understood these details fully. Check any terms and weigh up the quality of what is actually on offer against what you are paying out. Check carefully for additional clauses for events that are extremely unlikely. Make sure you know what you are paying for. Never buy more coverage than you need.
Which life insurance policy should I choose?
There are a great deal of different policies to suit everyone's needs. Speak to your advisor if in doubt. Remember, one of the main options is Term Insurance which provides a payout if you die during the term of the contract. You can take this out for the period of your mortgage to relieve dependents of any unexpected burden. You can also take it out just for the period when your children are financially dependent upon you.
Why do different people pay different levels of premiums?
The amount you pay depends on the level of risk you provide to your lender. The price you pay for life insurance depends mainly on your age, your health and your lifestyle and occupation. So if you are older, you have health problems, and you are a smoker and you work in a dangerous environment you will always pay more for life insurance than someone who is younger, healthier, a non-smoker in a low risk occupation.
Can I take life insurance out for someone else?
Yes. There are three parties in a life insurance transaction: the insurer, the insured, and the policy holder. The owner and the insured are usually the same person but not always. The beneficiary is the person or persons who will receive the policy proceeds upon the death of the insured. Although it is typical for an individual to name his or her spouse or other relative as the life insurance beneficiary non-relatives can also be named. Their must be an insurable interest at the outset of the contract.
