In simple terms, Life insurance covers your family or chosen dependents with a lump sum pay-out when you die.  You make monthly payments to the insurer in case anything happens to you during the duration of the policy, known as the ‘term’. If you do pass away during the ‘term’ your insurer will pay a lump sum of money that you agreed on to your family, known as the ‘sum assured’. Your family can then use this lump sum to clear any debts, mortgage, childcare if necessary or day to day expenses.

Types of Life insurance:

Single Life Insurance Policy

A single life insurance policy only covers one person although it can be suitable for anyone. You name a beneficiary in the policy, and they receive payment from your insurer when you die. You can name a different beneficiary for the policy pay-out by writing your policy into trust. Your beneficiary might be your partner, but they can also be a child, another family member or any named person that you choose.

Joint Life insurance Policy

Both people in a relationship are covered by the same policy. This can sometimes be more economical than buying two separate single policies. A joint life insurance policy covers both people’s financial contributions to the family. This type of policy only pays out once, so the sum assured must be enough to cover at least the total outstanding mortgage amount. You can choose to add any additional cover to be used for bills, expenses plus any extra money you want for your family. If one of you passes away during the term, the sum assured is paid to the other. If both of you pass away at the same time, the money is usually added to your estate, unless you’ve written the policy in trust. The lump sum will then be paid to your chosen beneficiaries straight from the provider – avoiding lawyers and probate.

There are three main types of policy. Two have fixed terms, usually for a period of time, while the other is indefinite:

Level Term Insurance

The total sum insured is the same amount no matter when you pass away during the policy, provided it is still active.

Decreasing-term Insurance

The pay-out decreases as the policy term goes on. This type of policy is designed to cover long-term financial commitments like mortgages, because as time goes on, your dependants will have less to pay off if you die.

Whole of life Insurance

Also known as ‘life assurance’, this type of policy covers your whole life and is guaranteed to pay out when you die. Whole-of life insurance is more expensive than the other two types because there will always be a pay-out at the end.

How much do I pay for Life Insurance?

Often Life Insurance is more affordable than we expect, although the price can vary between individuals. You monthly premium will depend on personal circumstances and your health and lifestyle can affect your monthly premium. Here are some of the factors that need to taken into account:

Your Personal Details:

This can include your age, your current health, any past health conditions plus your family health history. Your lifestyle can also affect the cost, an unhealthy lifestyle can increase your premiums, including smoking. Dangerous hobbies or jobs that place you at risk can also affect your monthly premiums.

Buying the right cover:

Life insurance with a longer term can be more expensive than those with a shorter term. The sum amount that you chose can also affect the monthly premium. It is your decision on the amount you can afford and the amount you want to be covered for, but generally the higher the amount and the longer the term, the higher the premiums will be.

It is also important to choose the right provider.  Your cover and monthly premiums may vary between each insurer so make sure you do some research.

It is important to speak with a professional and you should always answer your health and lifestyle questions truthfully to ensure the cost is right and the insurer is able to pay out.

When does Life Insurance pay out?

Life insurance pays out if the person insured dies before the policy ends. Your lump sum assured is often paid out by the insurer within 30 days of the death of the insured, the process being easier if the policy is placed into trust. However, each claim and each insurer are different and there may be certain regulation that extend the processing time. Your insurer may also pay out if you are If you are diagnosed with a terminal illness.

Terminal Illness

With most life insurance policies, terminal illness cover is automatically included. If you are diagnosed with a terminal illness during your policy term, then the full sum can be claimed. A terminal illness is defined by insurers as a disease with no known cure, or one that has progressed to a point where your medical consultant expects this to lead to death within 12 months. This can help you financially through this challenging time.

What if I don’t die – will my policy pay out?

Life insurance only pays out if you die while the policy is still active. Reason why it may not pay out:

• Your policy has expired
• If your life insurance policy expires and you haven’t claimed, it won’t pay out to your family when you pass away.
• If you stop paying your premiums
• If you don’t keep up with your payments, your cover stops.
• If you die as a result of suicide
• If you take your own life, your family might not receive a pay-out.

Do I need Life Insurance?

Would your family suffer financial hardship or be put at risk because of your death? If you die unexpectedly this may leave your family and loved ones with debt, a mortgage to pay, a funeral to cover or simply unable to pay the bills. Life insurance can make sense for many situations. When considering life insurance also keep in mind that the younger and healthier you are the more affordable the monthly payment may be. If you are planning to make changes in your life, it is worth considering your options at a young age to secure your policy.