Though it is not pleasant to think about your own death, it is wise to take out life insurance so that if you die, your dependants will not experience financial uncertainty. A life insurance policy provides the financial security that eliminates the financial struggle that loved ones can face after the policyholder dies.
There are a few types of life insurance policies available:
Term life insurance is taken out for a fixed period of time, usually between 10 and 25 years. If you die during this period, then the policy will pay out a fixed sum. You can also take out term life insurance that will pay out if you have a terminal illness.
If you outlive the policy period, the policy stops and no payments are made.
There is a type of term insurance where the sum paid out reduces over time. This form of life insurance policy is useful if you have a mortgage. The sum insured can decrease as the outstanding balance of the mortgage lowers. This strategy makes sure that the mortgage will be paid off if you die before the mortgage period ends.
Whole of life insurance
Whole of life insurance lasts a lifetime and pays out a guaranteed lump sum no matter when the policyholder dies.
Such policies can be non-profit or with-profits. With-profits insurance policies are affected by investments that the insurance company makes. If the investments do not do well, the premiums can increase. Most with-profit policies will not increase premiums for a fixed period of around 10 years. At death, they pay out a fixed sum, plus an extra amount if the profits from the investments are high. If the investments perform poorly, then no extra money will be available.
Non-profit insurance policies have fixed premiums and a fixed sum is paid out.
People over 50 can take out life insurance, but generally the pay-out will be small. Over 50s policies can be useful to cover funeral costs. If a person lives a long time, the insurance premiums could add up to more than the sum paid out.
Endowment policies are investment products that have a life insurance element. They were once popular for people who took out interest-only mortgages. They were sold as investments that, when the mortgage came to an end, provide the capital to pay off the balance owing on the home.
However, it’s worth remembering that many endowment policies have underperformed in the past and are not popular today.
Choosing a policy
With many types of policies available, it’s not easy to decide which type of life insurance policy is suitable for you, but the guidance of an expert could be priceless.
Contact Ascot Mortgages today to talk to you about your options so that we can find the right life insurance policy to match your individual financial situation. With access to a wide range of life policies, we can find the best insurance deals for you.