What Type of Life Insurance Do I Need?

Duh! I hear you say, life insurance is just that – you insure your life. All that’s needed (as the T.V ads will tell you) is to make a phone call or fill a form in online, choose how much you’d like to pay and bam! Your life is insured.

The trouble is it’s not that simple (surprise, surprise) and getting the right cover for your own personal circumstances can cause a headache no amount of aspirin will shift. In the following few words I’m hoping to allay any confusion you’re currently going through over what might be the most important insurance document you ever purchase.

Why?

Some of you reading this might be thinking “I’m not going to be here to enjoy the pay-out so why should I insure my life”? Well, if you have a spouse, children or anyone-else close to you who depends on you financially (no matter how much), they’re going to need some help if you’re suddenly not around.

It could be you need to protect a mortgage, make sure there’s money for a funeral or need to protect the family income, so that’s “why”!

Types

Yep, I finally got there! This is where the headaches can start, but I aim to keep it simple. Just bare the following terms in mind:

Term Assurance – When you’re searching for a policy, you will come across this but think about what it means for you and your family. Basically, you decide how much you pay and how long for. What you must remember is there’s a time clock put on your life. If you die within the specified amount of time – AOK, if you don’t, NOT AOK! If the last situation occurs, no money will be paid out AND you don’t get the premiums either.

Decreasing Term – If you come across this and think the premiums are a safe bet because they get lower as time goes by (which they do, hence the name decreasing) make sure you’re getting cover for the right thing. For instance, if you have a mortgage this type of cover will probably work for you because your payments will reduce over the years. In fact, this sort of cover will do for any type of loan that’s not likely to rise in value.

Level Term – Having been through the above, you’ve probably guessed this type of life insurance policy keeps the same premiums throughout and will give a lump sum once you’re no longer on the planet. This is a good option to go for if you have an interest only mortgage which doesn’t have an insurance policy currently attached to it for example, an endowment.

This one is also worth thinking about if you trust your nearest and dearest to invest a lump sum wisely so they don’t struggle in later life. If you think they’re likely to disappear off to Las Vegas for a couple of weeks, it might be worth thinking about a “family income” policy. This way, the income you currently receive won’t change if you’re not around.

Fingers crossed, this has given you some ideas and made the whole job a bit easier on that grey matter. Just remember, it is worth having life insurance because one of the only things that’s guaranteed in life is it will eventually end. I know that’s blunt but it is true.