You might have heard the hype about life insurance but do you really need it?
Life cover, also referred to as life assurance or term assurance, is a special type of policy that's designed to pay out a lump sum when you die. It’s designed to cover your main financial commitments to ensure that loved ones are left financially secure should the worst happen.
Types of Cover
In a nutshell, there are two main types of life insurance: protection only and investment type.
Protection-only insurance
Pays out only if you die during the term of the policy. Typically used for mortgage cover, it can help protect and cover the financial commitments you leave behind but won’t pay out if you’re still alive at the end of the term. It’s basic cover to help make sure you’re debts are taken care of when you’re gone and your dependents have some financial security.
Investment-type life insurance
Pays out regardless of whether you die or not. As it says on the tin, it’s an investment that provides a return, whatever happens. You will pay a lot more for this type of policy as it's designed to give you a lump sum at the end of the term, which you can use to pay for a variety of things, from university fees to funeral expenses.
Single or Joint Cover?
A single life cover policy is cover for one person and will pay out only on the death of the policyholder.
A joint life policy is really one life insurance policy to cover two people and the amount you are insured for is paid out if either of you dies, expiring once a claim has been paid.
The majority of independent financial advisers will typically recommend two single life insurance policies to provide double the cover for very little extra cost.
The benefit with this is that if you both die, both policies will be paid out. However, when it comes to choosing life insurance, you need to consider what you want from your policy.