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Back to Basics Blog - Life Assurance

Back to Basics Blog - Life Assurance

  • Protection

In this blog, Senior Financial Adviser Maria McMillan gives an overview of Life Assurance...

 

Not everyone needs life insurance. But if your children, partner or other relatives depend on your income to cover the mortgage or other living expenses, then the answer is yes – you probably do want life insurance, since it will help provide for your family in the event of your death.

What is life insurance?

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

It’s designed to provide you with the reassurance that your dependents will be looked after if you’re no longer there to provide.

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.

What isn’t covered?

Life insurance usually only covers death – if you can’t provide for your family because of illness or disability, you won’t be covered.

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

A terminal benefit will pay out on diagnosis of a terminal illness. Check the terms and conditions of your policy to see if you’re covered.

Most policies have some exclusions (things they don’t cover). For example, 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 all of the above.

Do you need life insurance?

If you have dependents, 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 – a life insurance policy can provide for them if you die.

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

You can’t rely on the government to take care of your family – the money they would get from the state is much lower than you’d probably expect. If you want to provide for your family financially if you die, think about getting life insurance.

Who doesn’t need it?

You may not need life insurance if you’re single, your partner earns enough for your family to live on or you’re on a low income and could be eligible for state benefits.

If you’re not sure get financial advice.

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.

The price you pay for a life insurance policy depends on a number of things such as your age, health, lifestyle, whether you smoke, the length of the policy and the amount of money you want.

For example, the younger you are and the less likely you’re to die from a medical condition, the cheaper your policy is likely to be.

Have you already got it?

If you have an employee package that includes ‘death in service’ benefits, this will cover you for a multiple of your salary and you might not need additional life insurance.

Bear in mind if you stop working for that employer, you won’t be covered under their policy anymore.

If you’re not sure, get financial advice.

 

 

 

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