We’ve all heard the saying “you only get one chance to make a first impression.” Well, when it comes to choosing a life insurance plan, you want to be sure that you are making a good first impression.
You don’t want to leave anything up in the air or have any questions about what is going on with your policy. That’s why we recommend starting early and getting your life insurance needs taken care of as soon as possible.
Here are a few things you should know before you apply for cover.
What is a Life Insurance Plan?
A life insurance plan is an agreement between you and your insurer designed to protect your family financially should something happen to you. You can use it to help your loved ones maintain their lifestyle or pay off debts, such as mortgages. It gives you peace of mind knowing that your family is protected.
You decide how much cover you require, what type of policy best suits you, and how much you want the policy to pay out. You then pay a monthly premium to your insurer in order to remain covered. Once you die, the policy pays out a cash lump sum to your loved ones.
Who Needs a Life Insurance Plan?
If you have dependents who rely on you for financial support, you need to ensure they are well provided for after your death. A life insurance plan will provide them with the money they need to live comfortably.
It’s important to understand that there are different types of policies available. Some only pay out if you die within a certain period of time, while others pay out regardless of when you die. There are also policies which pay out at a set age, rather than when you die.
There are many factors to consider when choosing a life insurance plan. These include:
- How much cover you need
- What level of protection you want
- The amount of money you want to be paid out
- Your current financial situation
- Any existing debt you may have
Types of Life Insurance Plans
Whichever option you choose, it’s important to weigh up what you’re protecting against and whether you really need it. If you do decide to take out a policy, there are some things you need to consider. Here are some of the main types of life insurance plans…
Whole life insurance
A whole of life plan (also known as life assurance) covers your entire life, providing protection against death. This type of policy pays out a fixed lump sum upon your death. The amount they receive depends on when you took out the policy and how long you’ve been insured for.
Premiums for whole life cover tend to be more expensive than other types, as you are paying for long-term cover. However, your premiums remain fixed throughout the policy, even as you get older or develop health conditions.
Term life insurance
Term life insurance is a standard type of life insurance cover. Unlike whole life insurance, it only provides protection for a set period of time, i.e 20 years. One downside is that the policy only pays out if you die within the agreed policy. Once you reach the end of term, the policy expires.
There are 3 types of term life cover:
- Level – your premiums and payout value are fixed during the policy term
- Increasing – the payout value increases over time to protect it from inflation
- Decreasing – also known as mortgage life insurance. The payout decreases over time as you make repayments.
One benefit of term life insurance is that premiums are often cheaper than whole life insurance. However, it only covers the short term as opposed to the long term.
Over 50s life insurance
Over 50s life insurance is a type of whole life policy intended to provide protection for those who are aged 50 and above. At this time, getting life insurance can be difficult, especially if you have health conditions. This can mean paying significantly more for premiums each month.
These policies offer guaranteed acceptance, which means you won’t have to disclose any health conditions or partake in any medical exams. However, premiums for over 50s can be costly, with a lower death benefit than standard types of cover.
Joint life insurance
If you and your partner share an income, you want to take out a joint policy. This type of cover protects two people under a single policy, and can be cheaper than taking out separate policies. This way both spouses are financially protected if something happens to the other. The money can be used to support your children, cover a mortgage, or help towards funeral costs.
The policy pays out either after the first death in the couple, or once both you and your spouse have died. It’s up to you which level of cover you choose.
How Much do Life Insurance Plans Cost?
Life insurance costs vary widely, depending on a number of factors. These include:
- Your age – the older you are, the more expensive your monthly premiums will be.
- Health – if you have a medical problem, you could find yourself paying a lot more for cover.
- Length of the policy – policies with shorter terms usually cost less.
- Level of cover – this refers to how much money you’re insured for. If you want to pay less, choose a lower level of cover.
- Lifestyle – Premiums are more expensive for smokers due to the length-term health effects of smoking.
The type of policy you choose can also affect how much it costs. For example, a whole life policy may be more expensive than a standard term life policy, because it provides permanent cover.
You can compare prices online from a range of providers. Simply enter a few basic details and choose and receive a quote – this will be an estimate of how much you’ll pay each month for cover. Once you are covered, you can relax, knowing your family is protected should the worst happen.