Life Insurance – a complete guide
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Life Insurance – a complete guide
Taking out life insurance is a way to protect the people that you leave behind in the event of your death. It’s not easy to think about, but could save your loved ones a lot of additional stress at a difficult time.
What is life insurance?
Life insurance will pay out if you die during the lifetime of your policy, or you are diagnosed with a terminal illness. It means that your partner and children receive a lump sum to help them financially.
Many people choose to set a payment that will repay the mortgage, to protect their family from losing their home should the worst happen. You may also consider including a further amount to help with living costs.
How does life insurance work?
There are different types of life insurance: level cover and decreasing cover.
With decreasing cover the lump sum your loved ones will receive goes down in value over the length of the term. This can be helpful if you want to cover the debt on your repayment mortgage, which obviously decreases over time as you make your monthly payments.
Level cover pays out a lump sum that remains the same throughout the policy, making it more suited to protect an interest only mortgage. This type of cover is usually more expensive than a decreasing term policy.
You can also add critical illness cover to your life insurance policy for an extra cost. This pays you an agreed lump sum if you are diagnosed with one of a large number of illnesses, such as cancer, stroke, heart disease, multiple sclerosis or Parkinson’s . The illnesses covered can vary from one insurer to another and you should check the policy terms and conditions carefully.
Why do we need life insurance?
Life insurance is a product that we all hope we never need to use. But life can be unpredictable and the unexpected does happen.
By purchasing a life insurance product, you can make sure that your family has the financial support they need to carry on without you.
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Whether you’re buying your first home, expanding your portfolio or looking for insurance to protect your loved ones, our friendly service and expert know-how can help ensure you get the most suitable solutions for you.
Am I eligible to apply for life insurance?
You’re eligible for life insurance as long as you are a UK resident aged between 18 and 85. A policy can extend past the age of 90, depending on the policy type and length of cover you choose.
Cover can vary and costs will be linked to your age, health and lifestyle. As a general rule, life insurance is usually cheaper if you take the cover out at a younger age.
What if I have pre-existing medical conditions?
A pre-existing medical condition is an injury, illness or disease that exists when you take out your life insurance policy. You might have already received medical treatment (like surgery or tests) for the condition.
It’s important to tell the insurance company about your pre-existing condition. If you do not disclose it, your loved ones may not be able to claim on your policy. You can usually get a life insurance policy with one or more existing conditions, but you may find you need to pay a higher premium.
How much Life Insurance do I need?
The cover you need will depend on all kinds of factors, so it’s best to talk to a financial adviser to get a personal recommendation. The main thing to consider is how your partner or family would cope financially without you and how much they would need to keep their home and current lifestyle.
How long should I get life insurance for?
A typical length of time for a life insurance policy is 20 to 25 years, although it could be shorter or longer depending on why you need it. Key things to consider are the time left on your mortgage and the age of your children.
It is possible to buy ‘whole of life’ insurance which will financially protect your loved ones in the event of your death at any age.
How much should I budget? What costs are involved?
Costs depend on various factors – the sum you want your family to receive, your health and life expectancy plus your age. How much to spend is a question of balancing your family’s needs with what’s affordable for you on a monthly basis.
How do I get life insurance?
It is possible to buy life insurance online, but we strongly recommend having a conversation with a broker like First Thought Financial. We will explore your specific situation and help you decide on the most appropriate level of cover based on your family circumstances and financial commitments.
Get in touch for an initial conversation, free of charge.
If you are looking for a mortgage or life insurance, call us today on 01923 606808 or complete our short enquiry form.
We’ll be pleased to help you.