Why Get Life Insurance?

Life insurance pays out a lump sum or regular payments upon death and so offers a way to provide your family with financial protection for mortgage, rent, household bills and other expenses.

There are a wide range of insurers and policy types available, and so it helps to compare insurance plans to find the right one for your specific needs.

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How Life Insurance Works

There are two basic types of life insurance policy available: whole of life insurance and term insurance:

Whole of life insurance runs for the duration of your life and so automatically pays out on death.

Term insurance runs for a specified period, typically 25 years. If you die in that time a tax-free cash lump sum is paid out. However if you live beyond the agreed term, your plan will expire with no cash-in value.

The premiums for term insurance are cheaper than whole of life policies due to the specified time that the policy will pay out in the event of death. It may be that you only require cover for a certain time period and so term insurance is a popular choice in these circumstances.

How Much Life Insurance Cover?

The amount of cover or sum insured needed that depends on your particular circumstances. For instance if you have a large mortgage to pay and have many family members you would require more cover than someone with a small mortgage and fewer family members.

You should also cover for future obligations such as education and child care costs.

The total cost of current and future financial obligations should be included in calculating an appropriate level of cover.