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Life insurance – do you need it?

If you have:

  • Dependants, e.g. school age children
  • A partner who relies on your income, or
  • A family living in a house with a mortgage that you pay

Then a life insurance policy can provide for them if you die.

You might also want a policy which covers your funeral expenses.

If you want to provide for your family financially if you die, think about getting life insurance.

You might want to think about setting aside enough money to cover funeral expenses.

What is life insurance?

Life insurance can pay your dependents money as a lump sum or as regular payments if you die.

Life Insurance is designed to provide you with the reassurance that your dependents will be looked after if you are no longer around to provide for them.

The amount of money paid out depends on the level of cover you buy. You decide how it is paid out and whether it will cover specific payments, such as mortgage or rent.

You may need to think about whether receiving a payout will affect any means tested benefits your dependents might otherwise be eligible for.

There are two main types of life insurance:

  • Term life insurance policies: run for a fixed period of time (known as the term of your policy) – such as 10, 20 or 30 years. These types of policies only pay out if you die during the policy term. There is no accumulated lump sum payable at the end of the policy term
  • A whole-of-life policy: will pay out no matter when you die, as long as you keep up with your premium payments.

What is not covered?

Life insurance usually only covers death – if you cannot provide for your family due to illness or disability, you will not be covered.

Some life insurance policies provide a terminal benefit, although these are not automatically granted.

Some policies provide a terminal benefit payable on the diagnosis of a terminal illness. You will need to check the terms & conditions of your policy to see if you are covered.

Most policies have some exclusions – they might not pay out if you die due to drug or alcohol abuse, and you normally have to pay extra to be covered when you take part in risky sports.

If you have a serious health problem when you take out the policy, your insurance might exclude any cause of death related to that illness.

You can buy other insurance products for these issues, which cover:

  • Long-term illness
  • Critical illness cover, or
  • Total and permanent disability

How much does life insurance cost?

Life insurance can be very good value.

Often just a few pence a day is all you need to provide your loved ones with plenty of financial protection (depending on your age and health status).

Check exactly what is covered for the level of the monthly payment.

The price you pay for a life insurance policy depends on a number of things.

These include:

  • Your age
  • Your health
  • Your lifestyle
  • Whether you smoke
  • The length of the policy
  • The amount of money you want to cover, the length of the policy, but also your age, your health, your lifestyle, and whether you smoke.

The younger and healthier you are, the cheaper your policy is likely to be.