The Benefits of Life Insurance
Life insurance is a type of monetary cover which is paid to any persons who may be dependant on you financially should you pass away. If you have one or more people who are your dependents, then life insurance is likely to be a good option for you.
If you are single with no children, or if your partner has a substantial income that can cover your family, it is unlikely that you will need life insurance. If it is likely that your family would be unsupported should you suddenly die, however, life insurance could be entirely necessary.
Types of Life Insurance
There are two main types of life insurance:
- Term life insurance: this policy runs throughout a chosen ‘term’ period and only pay-out if you die within the term you choose. Term periods are commonly anywhere between 5 and 50 years.
- Whole-of-life insurance: this policy means that you carry out payments for the rest of your life, and will pay-out to your beneficiaries anytime.
How Much Will My Beneficiaries Get?
The amount of money that your family members get depends entirely on the level of cover that you go for. You can choose how much you pay in relation to what your beneficiaries will need (for example, to cover rent, mortgage payments, food bills, etc).
You may also decide how this amount is paid; your family members may receive a single lump payment, or you may decide to issue them with regular payments or installations in order to support them.
What if I Have a Long-Term Illness?
If you suffer a long-term or critical illness, it can be significantly harder to find a life insurance policy. This is because it is far more likely for the lender to pay-out on the policy. It may be the case, due to your pre-existing medical condition, you will have to pay higher premiums on your life insurance policy to account for the risk involved in lending.
Alternatively, you may decide to get critical illness cover instead of life insurance. Critical illness cover is designed to protect you in the event that you become terminally or seriously ill and will subsequently be unable to work.
It is possible to get critical illness cover that is integrated with your life insurance policy, such that you are not paying on more than one premium. The downside is that you can only get one payout, so if you ask to withdraw following a diagnosis, you will not be able to retrieve further money should you pass away later.
Critical illness cover will only cover any illnesses that you have declared under the policy. This means that if you were to suddenly become ill with something that is not under your cover, then you will not get a pay-out for that affliction.
Income protection is similar to critical illness cover in that it covers you should you be rendered too ill to work, you receive payments to support you and your family. The difference is that with income protection, the payments are related to the salary that you would have had were you well enough to continue working.
If you decide to get income protection insurance, you must keep your insurance provider in-the-know as to your occupation details; if you change jobs, for example, then your policy will change according to your new salary.
Who Gets the Best Rate?
Your lifestyle choices will have an effect on how much you pay for a life insurance policy. For example, smokers will pay higher premiums than non-smokers due to the added health risks involved with smoking.
Other things that will affect the price of your policy include:
- Your age
- Whether you exercise regularly
- Your weight
- Your lifestyle in general
- The length of the policy
- Your health in general
If you have one or more people who are financially dependent upon you, it is likely that life insurance cover will greatly benefit their welfare and will likely help you steer clear of loans in the short term such as payday loans that may cause potential issues in the future.
You may wish to get critical illness cover included in your policy in case you should become too ill to work.
If you currently have a long-term or critical illness, it may still be worth paying the higher premiums on a life insurance policy. Alternatively, getting alternative cover or simply setting up a savings account for your loved ones may be the way forward for you.