With numerous financial products on the market, understanding each one can be difficult for many individuals. While there are payday loans which can help individuals facing a financial emergency, mortgages for individuals looking to purchase a house, and finance products for assets such as cars, there are different types of insurance which individuals can take out in order to provide additional protection or cover against specific risks. Here, at Wizzcash, we’re taking a closer look at life insurance in particular, what it is, how it works, and why people tend to opt for it.
What Is Life Insurance?
Life insurance is also referred to as life cover. This type of insurance is designed to help loved ones or dependents of an insured individual by providing a pay-out in the event that the insured individual was to pass away during the length of the policy. This can provide loved ones with reassurance that they will receive a cash sum pay-out in the event of the death of the individual who has the policy and in accordance with the policy terms. This pay out can help to pay off any debts which the individual may have incurred over time, help to cover child-care costs, and provide financial aid for any other household bills.
How Does Life Insurance Work?
Generally, life insurance is best opted for after a comparison of a number of insurers. Many insurance policies will allow individuals to choose the length of time they would like their policy to be taken out for and will based the policy amount on how much an individual would like to pay per month, or how much the policyholder would like to have paid out in the event of their death.
Why Do People Opt For Life Insurance?
There are three main reasons why people tend to opt for life insurance cover:
- If they have dependents (i.e. children of school age)
- If they have a partner who relies on their income
- If they have a family living in a house with a mortgage to pay
Types Of Life Insurance On The Market
Term life insurance: With this type of insurance, policyholders are able to choose how long they would like the cover to go on for (the term), and the amount they would like the cover to be for. Individuals will then pay a premium for as long as the policy goes on for. This can be split into two different types: level term (where the premium remains the same) and decreasing term (where the monthly premium cost reduces as time goes on).
Whole of life insurance: This type of insurance will remain in place for the insured individual’s lifetime, as opposed to fixed term. Premiums must be paid up until the individual dies and policy terms are not breeched, otherwise the policy will invalidate.
Over 50s life insurance: With this type of life insurance, only individuals over the age of 50 are able to take out the policy. This then works in a similar way to other policies where policy holders will pay a premium. It is important to remember that some policies will have an age limitation for claims, and may have some exclusions when it comes to long-term illness, critical illness cover, and total/permanent disability. If these exclusions exist individuals may consider additional cover or turn to an alternative policy.
Generic advice is not a service regulated by the Financial Conduct Authority.