A Beginners Guide to Life Insurance

If you have just started to look into life insurance, you may have found the ins and outs of it all pretty confusing. However, finding the right life insurance does not have to be complicated. To help you in your search, here is a beginners guide to life insurance.

What are the different types of life insurance?

Employee life insurance

Otherwise known as life assurance, group life insurance, or death in service, employee life insurance covers workers whilst they are in a certain employment. Employers can take out a group policy to cover all their employees, paying out a sum calculated on annual salary in the event of their death.

Employee life insurance can give workers financial stability and peace of mind that their loved ones will still receive income after they have gone. The policy is also automatically made in a trust, meaning that it won’t count towards your estate, and so isn’t subject to inheritance tax.

However, the employer is the policy holder, and so you are limited to their choices. On your death, it is the employer that must make the claim on behalf of your beneficiaries. Though no medical questions are necessary, this means that all employees pay the same into the policy, regardless of whether they are young and healthy.

Individual term life insurance

Term life insurance covers an individual policyholder for an agreed amount of time, such as for the length of their mortgage. This allows you to have reassurance that if something were to happen whilst you have outstanding loans, for example, that your family would not be left to pay it off for you.

This is a great idea if you are requiring protection for a set amount of time, and have a set amount of money you need to be covered for. However, once you outlive the term of the policy, you will no longer be covered, and must therefore find another kind of life insurance policy.

Whole of life insurance

Unlike individual term life insurance, whole life insurance lasts for the policyholder’s entire life. As long as the monthly premiums are paid on time, you are guaranteed a payout after death. Whole life insurance is most commonly taken out by those who are older, which has led to it sometimes being referred to as over-50s life insurance.

When do you need life insurance?

Life insurance is most commonly taken out by those who have financial obligations, such as children, a wedded partner, or a mortgage. It can also be used to help assist with your funeral costs once you pass, and to leave inheritance to your beneficiaries.

Thus, the demographic that holds the most life insurance per head is those aged 45-54 at 28%. Though only 2% of people 18-24 have life insurance, it can actually be cheaper to get insurance whilst you are young and healthy, as this can drastically lower your premiums.

How much does life insurance cost?

The cost of life insurance is based on a number of factors, such as age, health, job, lifestyle, and medical history. As a general rule of thumb, the more likely you are to make a claim on your policy in the near future, the more expensive the monthly premiums will be.

With this guide by your side, you will be able to make a more informed decision on which life insurance policy is best for you.

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