Whilst we all know it’s best to insure our house and car, and we always take the necessary step to get Youi Car Insurance Quotes, just in case the worst happens, we often forget about the most important thing to actually insure – ourselves! You may not be thinking that far into the future, but having life cover can ensure that your family is looked after when you’re gone.
However, when it comes to taking out a life insurance policy, things can get quite complex. So, in this article, we will guide you through everything you need to know, so that you can be fully well-informed on taking out life insurance.
Table of Contents
What is life insurance?
The concept of life insurance is simple, as it is a policy that you pay a monthly premium towards, so that when you pass away, a sum of money can be paid out to a nominated person or group of people. These are known as beneficiaries, and are usually your spouse, children or other family members.
The amount of this pay-out sum will vary depending on the life cover that you choose, as there are several types of insurance available in this field that will suit you and your lifestyle. With this guarantee of a pay-out when you are no longer around, you can be assured that your family members have enough money to pay certain expenses, like funeral costs or mortgage payments, for example.
How does life insurance work?
For this type of protection, the nominated beneficiaries will receive the benefits after the policyholder passes away. During your lifetime, if you have made the payments towards your life insurance, then the provider will pay out the lump sum of cash upon the proof of a death certificate of the policyholder. This is called the death benefit.
Life insurance consists of a legally binding contract between the insurance provider and the policyholder, so as long as you have continuously paid the premiums (which are usually monthly), the insurer is legally required to pay-out to your beneficiaries, when the unthinkable happens.
In order to take out a life cover plan, you will usually have to do a health and physical assessment. This will include submitting truthful details about your current and past health conditions, as well as details such as whether you smoke and your alcohol consumption. You will also have to disclose anything in your lifestyle that can be deemed a high-risk activity, such as regular skydiving, or if you have a potentially dangerous occupation.
All of these elements are taken into consideration for your eligibility and risk level, so that the insurer can determine at what rate they will insure you, or if they are able to insure you at all. Also, there are various options to choose from and some terminology to go through, and it wouldn’t be a bad idea to consult experts like Everdays to know more about how different insurance plans work.
What types of life insurance are there?
Once you are eligible for life cover, the level of the premium that you will pay is decided depending on the results of the medical assessments. There are also different types of life insurance that are tailored to suit your lifestyle and can alter the amount or way in which the death benefit is paid to your loved ones.
According to The Insurance Bulletin, the most common types of life insurance policies available are:
- Term life insurance — this offers a stated death benefit only, and is for a set period of time.
- Whole life insurance — this is permanent cover, with premiums that are fixed for as long as you live. This provides a death benefit and a cash value component.
- Universal life insurance — this is also a form of permanent cover, with a death benefit and cash value component, but you have the option to change the premium payments of the policy.
- Final expense insurance — this cover is designed to cover end of life expenses in particular, such as funeral costs and medical costs.
When deciding on the type and level of life insurance you require, it is always best to carry out extensive research, with easily found resources online, or to consult a financial advisor.
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