Should you be looking into life cover? It will certainly give you and your loved ones peace of mind.
The recent outbreak of COVID-19 may have made you think about your health and the future and whether you should consider taking out life cover if you don’t already have a policy in place. Depending on your personal circumstances, it is well worth considering whether you need cover and if so, what type and level of cover would best suit your personal situation.
In essence, you can choose from life insurance and life assurance policies when arranging cover. It’s not uncommon for people to assume that these are the same, but there is a clear difference you need to be aware of before you proceed.
A tax-free lump sum
Life insurance has a fixed term and pays out a tax-free lump sum in the event of your death during the term of the policy. Life insurance will typically cover you for between 10 to 25 years, but you can specify how long you want the term to last. If you have children, you may want to take out a policy that covers you until they become adults or until your mortgage is paid off.
Life assurance covers you for the rest of your life. There are some life assurance policies that allow you to conclude your payments at a certain age (usually around the age of 85). Life assurance is likely to be more expensive than life insurance as it doesn’t expire on a fixed date and a payout by your insurer is guaranteed when you die. However, there are competitive options available.
Financial security for your loved ones
Not everyone requires life cover – a single person with no dependents for instance, wouldn’t need this type of cover. However, if you have children, a partner or other relatives who depend on your income to cover their mortgage and bills then it is definitely worth having as the cover will provide financial security for your family if you die.
You can choose either a life insurance policy that pays out a lump sum in the event of your death or one that makes regular payments. Some policies will also cover your funeral expenses. You can also choose the level of cover you require. Some policies allow you to add critical illness cover but you can also purchase critical illness as a separate policy.
Look into income protection
It’s important to note that life policies usually only cover death – they won’t provide protection if you become ill or suffer a disability that affects your ability to work, though some may pay out on diagnosis of a terminal illness. It is also advisable to consider income protection if you are worried about what would happen to your family if you are unable to work through illness or disability.
Life insurance can be fairly competitive and payments are made in the form of monthly premiums. How much you pay depends on various personal factors, including your age, health, lifestyle, whether or not you smoke and the length of the policy. Age is a factor to consider when taking out life insurance. The younger you are the cheaper the policy.
The cost also depends on the amount of cover you require and the length of your policy. Some life insurance policies can be set up to increase the level of cover over time.