What is life insurance?
Life insurance is a contract between a person and an insurance company. It is a deal for premium payments, and the insurance company will pay the death benefit, which is a large lump sum; this goes to the beneficiaries after your death. This is the beneficiary’s money for them to use as they wish.
Why do people pay for life insurance?
There are many reasons people pay for life insurance; here are the main ones:
Buying a new home
When buying a house, many people will get life insurance if they die. The responsibility falls on a loved one if your remortgage isn’t paid back. It also allows you to ensure those financial commitments are met when you’ve gone.
The type of life insurance is decreasing cover; this covers any large reducing depts and remortgage payments. The longer you cover your place, the less you will pay out because your debt will continue to decrease. This may also mean the premium you pay monthly will fall.
Level-term life insurance may be better if you have an interest-only mortgage. This is when your payment is on a fixed term and is in place for a set amount of time. This cover will mean your family payout is the same whether you die a year into the policy or a year before the policy expires.
Getting married is exciting, and it is easy to get carried away with planning. Life insurance will enable you to contribute to your partners’ well-being when you pass.
There are two main types of policies: single and joint, covering either just you or both of you. Getting a joint policy will be cheaper than you and your partner getting two separate policies. Once one of you dies, you will no longer be covered by joint police, so the surviving partner must take out an individual policy.
Of course, there will be pros and cons to both types of policies. For example, if your and your partner’s relationship falls apart, you may not be able to divide the policy into two single policies. Likewise, if in the future you apply for a single policy after a joint policy, the premiums may be higher because the premiums increase with age.
Having a baby
Having a baby is another milestone point where life insurance is very important. Life insurance helps protect you and those who rely on your income, for example, your newborn. The policy will protect your family for the length of your policy if you, unfortunately, die early. This policy runs until the child reaches maturity, which is 18.
This cover will give you peace of mind that your child is protected.
Level and increasing cover term insurance policies pay out large amounts of money in the incident that you die in the agreed term time. Having this policy allows a large amount of money to be paid to your children than paying off debts.
Planning for a funeral
Funerals are costly, and all the costs add up. Over 50’s policy and level and increasing term policy allow you to contribute to your funeral payments, meaning, when you die, there is less to pay back.
Over 50’s life cover will be different to term life, and there will be no fixed terms. It lasts as long as you’re alive and will be paid out as you pass. You will stop paying when you pass away or on the policy anniversary date.
If you are taking a policy out just for your funeral, you may be better off choosing a funeral benefit option.
Inheritance tax is another life insurance many choose to get. Getting inheritance tax allows any debt in bills to be paid off so that your children get the inheritance that you had hoped for them to get.
Growing old is a significant factor in life. There are many reasons in life we begin to think about the next generation, whether due to ill-health or just growing old. Life insurance gives you that stability and financial security for the next generation in mind. This allows you to enjoy the time you have with no worries.