10 Things You Need to Know About Life Insurance

Taking out a life insurance policy is one of the best things you can do if you’re hoping to financially protect your family’s future. If something was to happen to you, the right policy can give your family access to much-needed financial support during a difficult time. It doesn’t matter whether you’re young or old, single or married, life insurance can bring peace of mind.

If you’re thinking about taking out life insurance, here are 10 things you should understand first.

1. What is life insurance?

Life insurance can provide your loved ones with a cash pay-out if you were to pass away within the policy term. This can be a huge help in minimising the financial impact of losing someone, as your family will be able to cover the likes of household bills, childcare or mortgage payments without worrying.

Taking out life insurance is an incredibly helpful way of leaving money behind for your family, and it could be used to support them for a number of years depending on how the money is used.

It’s important to understand how it works and the different types available, so that you can take out the right policy to suit your needs.

2. How does life insurance work?

When you take out life insurance, you will usually choose the length of the policy and the pay-out amount. If you aren’t sure of the amount you need, we have an online calculator to help. These factors, along with some basic health and lifestyle questions, can help to determine the cost of your cover. This is then worked out into monthly payments, which you must pay in order for your policy to remain valid.

It’s important to think carefully about how much money your family would need in your absence; factors like what is left to pay on the mortgage, children’s education fees and day-to-day living costs should all be considered. You can also choose who receives the pay-out, but it’s important to remember that your policy should be written in Trust to make sure this happens.

3. What are the different types of life insurance?

There are different types of life insurance, each with its own benefits to suit different circumstances and needs. The simplest and most straightforward type of life insurance is term life insurance.

Term life insurance comes in two forms; level and decreasing. Level term life insurance means that your cover and the pay-out remains the same throughout your policy term. So, whether you were to pass away at the beginning of the cover or the end, your loved ones would still receive the same amount.

Decreasing term life insurance is also known as mortgage life insurance. This type of cover decreases in line with the amount left to pay on your repayment mortgage. So, as you continue paying off your mortgage over time, your amount of cover will reduce.

In some cases, you may wish to take out life insurance that offers guaranteed protection for life. Whole of life insurance can do just this, and will guarantee a pay-out no matter what age you are, as long as you continue to pay your premiums.

There are other types of protection policies that will protect other outcomes, such as being diagnosed with a defined critical illness or becoming unable to work due to injury or illness.

4. Why is life insurance important?

Taking out life insurance is important, but many choose to ignore the reality of what would happen if you were to pass away without the proper protection. Life insurance allows you to be proactive about financially protecting your loved ones; so, your family can meet financial commitments without worry.

If you don’t currently have a policy, you’re not alone. You might not have got around to it yet, or you might be weighing up your options in changing your cover. Perhaps you haven’t taken cover out because you’re unsure of any current protection plans you have in place, such as employee benefits.

For parents, life insurance can mean your dependents will be financially provided for and be able to cover important costs. Life insurance can also contribute towards funeral costs.

5. Do you need life insurance?

Needing life insurance can depend on your personal circumstances. If you have dependents, such as children or a partner, you may benefit from a life insurance policy that can provide financial support for them.

You may also need life insurance if your benefits package from your employer isn’t enough, or you don’t have a package at all. Consider what protection you already have in place, and if you need any additional cover. If you are self-employed, you won’t receive the usual benefits such as death-in-service, so this is an important consideration.

If you aren’t sure whether you need life insurance cover, you can use our cheat sheet to help you decide. Our advisors are also on hand to offer free, no-obligation advice.

6. What are the benefits of life insurance?

There are any number of personal reasons why you might take out life insurance, and one of the biggest benefits is peace of mind. A policy can enable you to create financial provisions for your loved ones, even after you have passed away.

The pay-out from life insurance can leave your family in a stable financial situation, especially when it comes to any debts or bills.

In today’s world, our range of expenses is always growing. From mortgages and utility bills to car payments and subscription services, we commit to a number of monthly payments without thinking about what would happen if we passed away. Would your loved ones be able to cover these payments without additional help?

What’s more, few of us have sufficient savings in the bank for when the worst happens. Putting money aside can be difficult, but a life insurance policy can mitigate for a lack of savings.

7. Should you choose term or whole life insurance?

Whole of life insurance is designed to last as long as you do. It can be a valuable benefit to have as it guarantees a pay-out. However, term insurance is usually more popular.

The main difference between the two policies is the length; term life insurance will only run for a set period, such as 25 years. If you pass away during that term, the policy pays out to your loved ones.

Whole of life insurance is generally more suited to those who wish to leave something behind for their family, or offering financial support for everyday living costs or a contribution towards funeral costs. It is one of the more expensive types of cover.

Term life insurance is more suitable for those who are hoping to provide financial support for a specific purpose, such as a mortgage or raising your children. Term life insurance can help to replace your income over a certain period while it is needed most.

8. How long should your term life insurance be?

The length of your life insurance policy is personal to you, and should be based on the reason you need the cover. If you have a mortgage, you should ensure that the term of the mortgage is covered. In other words, the term of your policy matches the remaining term of your mortgage.

If you have children, the length of your policy could last until your children are grown up and be able to financially support themselves. Another factor to consider is age. Typically, the younger you are when you take out a policy, the lower your premiums could be. If you have an immediate need for life insurance, delaying your application may mean that premiums could be more expensive in the future.

We can offer free advice to quell any doubts you might have, giving you peace of mind that you are purchasing the right cover. It’s really easy, simply complete the form and we’ll be in touch at a time that suits you to find the best possible cover, at the best possible price.

9. Is life insurance worth it?

If you don’t have sufficient savings or a big enough employee benefits package, life insurance provides that additional safety net for you and your family. With bills to pay and a family to look after, life insurance can help to cover living costs without worry.

No one wants to think about their family continuing on without them, but you never know what’s around the corner. Protection policies can help you to plan for the unexpected, whether that includes being unable to work due to a critical illness or passing away.

If you want to help provide for your family during a difficult time, life insurance is worth considering.

10. How to choose the right life insurance

One of the most effective ways of getting the right cover at an affordable price is to use an insurance broker, like us. We do the hard work for you, searching the market to secure the right policy that meets your needs and budget.

At Caspian Insurance, we put you first, taking you through the process and making sure you understand your cover. Our UK-based advisors are here to help you find a tailored policy, with a free trust service offering support and guidance.

Please note the above does not constitute as financial advice and may change dependent on individual circumstances and budgetary requirements.

To find out how we could help you secure the right life insurance, get in touch today.