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life & protection

Life Insurance & Protection

Life insurance guarantees a lump sum of money to be paid to the beneficiaries after the death of the policy holder. Life insurance is highly recommended for people who generate income and have dependents.


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Term Life Insurance


Term Life insurance is life insurance that only lasts for a set amount of time. This set amount of time can be anywhere from 1 to 30 years. There are two different types of term life insurance. Level term and decreasing term. Level term life insurance is vastly more popular than decreasing term life insurance. Level term means that the amount of money, or death benefit, stays constant throughout the entire term length. Decreasing term has a decreasing amount of money, or death benefit, as time goes on. The death benefit normally decreases every year.

The main components that make up a term life insurance quote are the person’s age, sex, health, and life expectancy. It is normal for the insurance provider to request a medical examination. If George is a 37-year-old non-smoker in good physical condition, then he will easily be able to obtain a £250,000 policy for £20-£30 per month for a 10-year term. If Peter should pass away during the 10-year term than his beneficiaries will receive the full death benefit of £250,000. Should Peter pass away after the 10-year term without renewing his insurance, his beneficiaries will receive nothing.

As blunt as it may be, insurance companies need to assess risk. The older one gets the higher the insurance premiums. Term life insurance is usually desired by young couples with children. Young, healthy parents will typically get low insurance premiums.


Protection

Protection insurance is designed to cover you if you suddenly cannot work for any reason, like a serious illness or injury. They are for those who should they stop working, would not be able to survive on savings or sick pay. It will pay out for as long as you are off work, and you can claim as many times as you need to while the policy is valid.

Types of Life Insurance


Whole Life/Permanent Life Insurance

The main difference between term insurance and whole life is that while term insurance only lasts for a set amount of time. Whole life/ permanent insurance lasts for the policy holder’s entire life regardless of age.

The three main types of whole life/ permanent life insurance include traditional whole life, universal life, and variable universal life insurance.

Traditional Whole Life

Traditional Whole Life insurance is the most consistent of all life insurances. The insurance premium stays the same throughout the duration of the policy holder’s life. The benefit of this is that it is easy to understand. The downside is that the beginning payments are more expensive to compensate for the higher risk later on.

Universal Life

Universal Life insurance is permanent life insurance with an added investment savings element and low premiums like term life insurance. It provides more flexibility as policyholders can adjust their premiums and death benefits. This is also true of variable universal life insurance, though neither of them has the minimum cash value guarantees like whole life insurance does.

Life Insurance Tips

Important things to note.

Term Life Insurance

If you buy term life insurance, it is critical to note when your term ends. Before it expires you should be looking into renewing your insurance, as you don’t want to be caught out unexpectedly!

Small print

Read through the small print before you take out a policy so you know exactly what is and isn’t covered. If you’re unsure, ask the provider, your insurance broker or financial adviser. What is included varies massively by insurer, so it’s important to read the definitions so you know you’re comparing similar policies.

Switching

If you’re young and healthy, you may find it easy to get a better deal. As you get older, it can be tempting to switch but it’s important to make sure you’re getting a better deal. If you do switch, don’t cancel your existing insurance until your replacement policy is fully set up and you’ve made your first monthly payment. Once you’ve cancelled, you can’t go back.

Adding cover

Life changes, and your life insurance should change with it. It’s important to review your policy and make sure you’re paying a competitive price for the right amount of cover. Common reasons to change your insurance are having more children, if your partner stops working or if you’ve taken out a new mortgage. You can also decrease your cover, for example, if a new employer offers you a better death package.

Death in service

You may have employee benefits from your company that include ‘death in service’ benefits. If you have a generous package, life insurance may not be necessary. However, as soon as you stop working for that employer or change jobs, you will no longer be covered.

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FAQ's

Everything you need to know about life insurance & protection.

It depends on age, marital status, hobbies (like extreme sports), whether you are a smoker, your health (including weight and family medical history) and your job (as some carry higher risk).

How much ‘cover’ you need i.e. how much an insurer may have to pay out depends on if you have debts, mortgage/rent, how many dependents you have and your take-home pay/income.

You can get quotes from banks, specialist brokers, credit card companies, independent financial advisers, retailers like some major supermarkets, insurers, comparison sites or your mortgage provider.

It can depend on your age, job, smoker status, the percentage of your income you’d like to cover, waiting period before the policy pays out, the range of illnesses and injuries covered, and your personal health (including weight and family medical history).

You might not need income insurance if you could get by on sick pay, you could survive on government benefits, you have enough savings to support yourself, you could take early retirement, or your partner or family would support you.

You’re probably fine without life insurance if you’re single, your partner earns enough for your family to live on or if you’re on low income and eligible for state benefits. It’s always best to get impartial financial advice if you’re not sure.

Life insurance can be very good value, and only cost a few pence a day to provide all the protection you and your family might need. Premiums do vary and are highly dependent on many factors. In general, the younger and healthier you are, the cheaper your life insurance policy will be.

You have up to 30 days to change your mind about your insurance policy and get a full refund.

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