Term life insurance (also known as term life assurance) pays your family or partner a lump sum if you die. Term life insurance policies last for a set number of years, known as the term. Whole of life assurance policies are open-ended and last for as long as you live. As a result whole of life insurance policies are more expensive than term life insurance policies. Term life insurance is normally used to cover either your mortgage or to give your family money if you die.
Do I need Term Life Insurance?
If you have children it's essential that you have life insurance. Also if you have a partner or someone else that depends on you financially who wouldn't be able to cope financially without your income you also need life insurance.
Decreasing and Level Term Life Insurance explained
As the name suggests level term insurance provides a set amount of money for the life of the policy as a lump sum. For example, you could take out a level term life insurance policy that would pay out £150,000 if you die within the next 25 years. Level term insurance can be used to provide money for your dependants, or pay off an interest-only mortgage where the amount you owe doesn’t reduce over time.
Mortgage protection assurance is also called mortgage life insurance as it is designed to pay off your mortgage when you die. The amount insured reduces in line with the mortgage over time. The term of the insurance policy is normally the same as the length of your mortgage - 25 years is typical. Mortgage protection insurance is the life insurance that most people have.
Decreasing term life insurance works like mortgage protection assurance, but instead of the amount covered reducing in line with your mortgage each year, the amount the policy will pay out reduces by a fixed amount each year.
How much does Term Life Insurance cost?
In the last decade the cost of life insurance has fallen by between 20 and 30 per cent. Prices for both term and whole of life insurance policies are now up to almost a third cheaper than they were in 2000. However there can be big differences in the cost of the cheapest and the most expensive life insurance policies. It is also important that you buy the right insurance and shop around to get the right cover at the right price.
How much Life Insurance do I need?
In order to work out how much life cover you need you will need to do some calculations. First you will need enough money to pay off your debts, like, your mortgage and any credit cards or loans and to pay for your funeral. Your partner or children will also need money to live on each month, for example, until the children are financially independent, this could be when they are in their 20’s if they go to university.
How to find the right Life Insurance Policy
Life insurance is complicated and it's essential that you choose the right policy. We specialise in life insurance and will search the market and help you find the right cover at the best price available. Quotes for life insurance are free and you are under no obligation.
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