Most people get to a point in their lives where they have both people and possessions they want to protect. One strategy for providing for loved ones is to take out life insurance. Sounds simple, doesn’t it? Before buying this type of insurance, though, it’s advisable to educate yourself, so your premiums are spent in the best possible way for your unique needs. Did you know that there are several types of life insurance, each of which has advantages and disadvantages? Read on to learn more.
This insurance is the cheapest and simplest type. When you buy term insurance, you select a length of time, or term, that defines how long you’re covered. Typical terms run for 10, 15 or 20 years. If you die within the agreed-upon term, the insurance pays out. What happens if you outlive the defined term? Unfortunately, your survivors get nothing. Term life insurance has an interesting feature that applies to couples. It allows them to obtain cover under the names of both people. Then, the policy pays out if either member dies during the term. This feature makes term life insurance both affordable and attractive to couples.
This type of cover pays out an agreed-upon sum when you die. There’s no term or time limit involved. Your cover extends for your entire life. Whole-of-life cover, also called whole life, usually is more expensive than term insurance. However, your monthly premium can be thought of as an investment that contributes to a fund that grows throughout your life.
Critical illness insurance provides a cash payment if the policyholder is diagnosed with an illness that’s listed on the policy. Permanent health insurance pays a proportion of your salary if you are prevented from returning to work by accident or illness. This type of cover stays in effect until your retirement date. Funeral cover provides payment that helps defray the ever-increasing cost of a funeral and burial plot. Also, be aware that there are EU-wide rules regarding cremation emissions that can contribute significantly to funeral expenses, so funeral insurance is a wise choice.
Mortgage protection insurance pays the policyholder’s mortgage payments in cases of unemployment, sickness, accident or death. Over 50’s cover helps defray the increasing cost of obtaining cover for ageing people, especially those who have had a major illness or accident. These policies don’t require a medical exam and guarantee cover up to age 75. Some policies provide cover up to age 85. Income protection insurance, also known as replacement insurance or permanent health insurance, covers any significant decrease in income due to a variety of injuries or long-term illnesses. It provides tax-free monthly payments.
When choosing life insurance to buy, be sure to take some time to consider how suitable the cover is for your particular needs, the cost of the cover, the return, the involved risks, applicable restrictions or special conditions, and degree of flexibility, meaning whether you can make changes to the cover at a later date. Be aware that insurance providers are regulated by the FSA (Financial Services Authority) and must provide prospective policyholders with information that clearly sets out all basic and relevant facts.
Insurance brokers must tell consumers whether they are offering advice or simply information about the type of cover that they offer. They also must disclose from whom the cover comes and how much it costs. This important policy information is designed to set out the essential facts and components of the cover. If you’re buying investment-type cover, insurers also must disclose all relevant features in a more detailed way that describes how your investment may perform over time.
The simple answer is "yes." You should seek unbiased information from a provider, along with advice that addresses your particular needs and situation. The best insurers will analyse your unique circumstances and recommend the appropriate cover. This usually involves an exchange of information in a face-to-face meeting, or by way of telephone, email or post. The FSA provides a measure of protection that ensures that if you receive unsuitable or defective advice, you’re able to claim compensation. Even if a provider sells cover without advice, it still must adhere to FSA rules.
Armed with this basic information about the types of available life insurance products, consumers are better able to make informed choices.