What type of life insurance do I need?
Should the worst happen, it’s nice to know that your family would be taken care of. A life insurance policy can give you this peace of mind. But with so many different types to choose from, picking out the right policy for you can be tricky. It’s important to do your research first and, if you’re still struggling, you can always seek the help of a professional insurance broker – such as Rigby Financial.
5 different life insurance policies
Most providers will tailor their life insurance policies to meet your specific needs. However, generally speaking, they can be broken down into five main categories. These include:
1. Term life insurance
This is the most common type of policy. Essentially, term life insurance provides coverage for a specific amount of time. Most policies last for 10-25 years. If you die at any point within this time-frame, the insurance provider will pay out the agreed amount. If you don’t pass away, the policy simply comes to an end and you will receive no payment or refund on your monthly premiums.
Term life insurance can be taken out over a level or decreasing term and the cost will vary depending on this and a variety of other factors – including your health, age, and location.
2. Whole-of-life cover
Just as the name suggests, whole-of-life insurance provides cover for a lifetime. The policy doesn’t have an end date. You are simply expected to make payments until you pass away, when the final payment will then be made. This payment is guaranteed and, as a result, whole life insurance tends to be more expensive than some of the other options on the market.
It’s also important to note that a percentage of your premiums will go into investment funds – and the size of your final pay-out will depend on how this investment has performed over the years.
3. Family income benefit
Most life insurance policies will pay out a lump sum when the policyholder dies. Whilst this money can help to settle any immediate debts (e.g. the mortgage), it can be difficult to manage on a month-by-month basis – which is why many people now opt for family income benefit instead.
This specific type of life insurance will provide a monthly tax-free income, from the day that you die until the end of the policy term. It can be kept at a constant level or increased gradually over the years (with the cost of living) and it’s a good way to make sure your family stay financially secure.
4. Over 50s life insurance
The main benefit of an over 50s policy is that anyone between the age of 50 and 75 will be accepted. There’s no need to have a medical assessment. It doesn’t matter if you’re suffering from ill-health. Everyone is welcome. Most policies don’t have an end date and, as long as you’ve paid your premiums for more than 12-24 months, they’re guaranteed to pay out when you die.
Over 50s life insurance is generally affordable. But keep in mind, the level of cover offered is quite low and the final pay-out is usually just enough to cover the cost of a funeral.
5, Relevant life insurance and group life schemes
Life insurance (or death-in-service) is commonly provided by employers. Dependent on the size of the company, this will either be a group life scheme or a relevant life insurance policy – but both, essentially, mean the same thing. It’s set up by your boss and, if you were to die whilst working for them, the policy pays out a tax-free, lump sum – which goes directly to your financial dependents.
Relevant life insurance is usually deemed as a ‘perk’ of the job. It isn’t portable. If you resign, you lose the coverage – which is why most employees still like to have their own personal policy as well.
Which is the right life insurance policy for me?
The ‘ideal’ life insurance policy for you will depend on your individual circumstances. You should think carefully about your specific needs and, once you have an idea of what you might like, it’s often worth contacting an independent insurance advisor – such as Rigby Financial.
Our team of experts have strong experience in this area. They have helped countless people leave something behind for their family and, by conducting a thorough ‘fact-check assessment’, they will identify the perfect life insurance policy for you – whether that be personal or commercial.