What is life insurance?
A life insurance policy pays out a sum of money to your loved ones if you die while the policy is active. It is intended to ensure that those you leave behind don’t suffer financial hardship as a result of your death.
You’ll need to pay monthly contributions (‘premiums’) to keep your plan active.
What is term life insurance?
Term life insurance provides cover for a specific period of time. It’s often purchased to accompany the term of a mortgage, or to cover the years when policyholders have children depending on their income.
There are different types of term life insurance policies, including:
- Decreasing: The amount of coverage decreases over the term of the policy. This type of policy is often used by people who have a specific cost they want to cover for their loved ones, such as paying off a mortgage
- Level: The amount of coverage remains the same throughout the policy term
- Increasing: Increasing term life insurance is a type of life insurance policy that increases in value over time to help protect against inflation and rising living costs.
What is whole of life insurance?
Whole of life insurance has no end date and guarantees a payout as long as premiums are paid.
What is terminal illness cover?
Terminal illness cover is a type of life insurance that pays out a lump sum if you are diagnosed with a terminal illness and have less than 12 months to live. It’s different from standard life insurance, which only pays out if you pass away during the policy term.
Can I cash in my life insurance?
It depends what kind of policy you have and the terms of that policy. With a term life insurance policy, there is no option to cash-in the policy at any point. It only pays out if you die within the duration of the policy. Some whole of life policies have a cash element, however, which means that some of your premiums are invested, and returns on this investment can be withdrawn or used to borrow money.
How much will I pay for life insurance?
Your premiums (the ongoing payments for your cover) will vary depending on a number of different factors. They include:
- The type of cover you choose
- The amount you want your chosen beneficiary/beneficiaries to receive in the event of your death
- The length of cover
- Your age
- Your health
- Your personal and family medical history
- Your occupation
- Whether you participate in any risky activities
- Whether you are a smoker
Remember: Insurance policies will only provide cover as long as you continue to pay your premiums.
Want to understand more about life insurance? Read our full guide here.
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