Which life insurance plan do I need?

Which life insurance plan do I need?

Life insurance can be an important asset, especially if you want to ensure that your family will be taken care of after you pass away. There are several types of life insurance plans out there to help protect your family during potentially difficult times ahead. Let’s take a look at the different types of policy plans available to you…

What are life insurance plans?

Life insurance plans are designed to protect your family from financial hardship if something were to happen to you. When you die, your policy pays out a cash lump sum to your loved ones. This can help pay off debts, cover funeral costs, provide for your children’s education, and help your family save for retirement.

There are many different types of life insurance policies that can fit any budget. There are two main types of life insurance policies – whole and term life cover…

Term life insurance

Term life insurance provides cover for a certain period of time, for example 20 years. If you die within this term, your beneficiary receives the death benefit. However, if you survive the term, your policy will expire and you won’t be able to claim any money back in the premiums paid till this point.

Term life insurance has 3 levels of cover:

  • Level term – The standard form of term life cover. Both your premiums and death benefit remain fixed throughout the policy term.
  • Decreasing term – Predominately used to cover large costs like your home’s mortgage. The payout value of the policy decreases over time as you make repayments.
  • Increasing term – This type of cover is designed to prevent the eventual payout from being affected by inflation. To do this, the payout value of the policy increases over time.

Whole life insurance

Whole life insurance provides permanent life insurance cover for you and your loved ones. With this type of policy, both the cost of your premiums and death benefit are fixed throughout. When you die, your insurer issues a cash lump sum to your loved ones. Depending on your provider, you may be able to cash out your policy early. However, this usually incurs a penalty, significantly reducing the amount you receive.

Premiums for whole life insurance are usually more costly than for term life insurance. However, your family is assured of a payout, so long as you keep paying your monthly premium.

Types of life insurance plans

 The type of life insurance plan ultimately will reflect on what you want your policy to cover. This could be to pay off a mortgage, provide support for your children to cover your family’s loss of income from your death. Or it could be to provide for your partner should you die unexpectedly.

There are a few things to consider when deciding which policy to purchase, such as:

  • How much coverage do you need?
  • Do you have enough savings to cover the cost of your premiums?
  • Do you have sufficient funds to cover the cost of a mortgage or other debt payments?
  • Are you planning to leave a legacy to your beneficiaries?
  • Is your family financially stable?
  • Will they be able to afford their living expenses without your income?

Mortgage life insurance

For most of us, a mortgage is likely to be one of the biggest payments made against our name. But if you were to die before it’s repaid, your mortgage lender will expect your family to continue payments. If they’re unable to make these repayments, they may be forced to sell their home. In this case, it would be wise to take out life insurance to cover a mortgage.

There are 3 main types of mortgage life cover:

  • Whole life insurance
  • Level term life insurance
  • Decreasing term life insurance

Family life insurance

If your family relies on you to provide for them, you should have plans in place if anything were to happen to you. They might also struggle to meet day-to-day bills, or covering large payments like a mortgage, debt or loan taken out in your name. Life insurance can help them cope with all of these situations. You may also want to leave something for your children to help provide for their future.

If you’re looking to protect your family, you should consider applying for:

  • Whole life insurance
  • Term life insurance
  • Joint life insurance

Critical illness insurance

If you suffer a serious medical condition that can lead to disability or even death, critical illness insurance can help protect your family. It pays an agreed-upon benefit if you become disabled due to a specified medical condition. Illnesses covered by critical illness insurance can include:

  • Heart attack
  • Stroke
  • Certain types of cancer
  • Multiple sclerosis
  • Parkinson’s disease
  • Alzheimer’s

Remember, not all insurance companies cover the same illnesses. With this in mind, you should check your policy documents to understand what illnesses are covered under your policy.

Joint life insurance

A joint life insurance policy is designed specifically for couples who wish to insure each other. This type of cover is ideal for couples who share an income, as well as the financial responsibility of their household.

Joint life insurance has two levels of cover – first death and second death:

  • First death pays out after the first death in the couple
  • Second death pays out after both policyholders have passed away

Many couples opt for joint cover, as it can often be cheaper than buying separate policies. You should discuss your needs with your partner or spouse to ensure that you have adequate cover in place.

Once you know which policy to buy, you can apply for an online quote throughout one of the internet’s many insurance providers. However, if you’re looking for professional advice and guidance, then it’s best to speak to an insurance advisory broker.

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