Life Insurance – what product should I go for? (AD)

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AD. Thoughts of Life Insurance do not usually start until we have bought a home and are paying a mortgage, or you have started a family and understandably wish to put the necessary measures in place, ensuring your loved ones are looked after should anything happen to you.

A trip to Clacton-On-Sea - Family time

As the milestones we reach and the precious things in life we gain grow, the more reason we have to protect them. That said, there is more to life insurance than this. This, however, might not be realised or understood until you begin researching, such as all the different insurance products available to protect the life you love.

Life Insurance

1 in 2 households with a mortgage at present does not have life insurance. With a mortgage being such a huge responsibility, this statistic is immensely high – this is prior to adding in partners and children who would have to cover the mortgage repayments if the worst happens. Although death is something we do not want to think about, particularly in your 20’s and 30’s, there is no denying that the unexpected can happen at any time, right?  If the worst were to happen to you, life insurance will help to ensure your partner or family is supported financially and not left to pay the bills alone.

By paying monthly life insurance payments, this secures a lump sum payout should you pass away. Funeral costs are a well-known costly expense – the last thing your family need to be worrying about in that situation is how to cover this cost. In a difficult time like this, a life insurance payout can really assist in easing potential added worry and pain. Surely this is worth a small percentage of your monthly paycheck?

Income Protection Insurance

Income Protection Insurance works differently, as it does not pay out in the event of death – it is instead designed to offer you protection if you are not able to work and earn an income. This can be said to be the most essential cover available.

Should you become extremely ill, disabled or injured, income protection insurance will replace part of your income. If your illness or injury turns out to be long term, this insurance continues to pay out either until you begin working again, or if required until you retire. It covers a majority of illnesses that render you unable to work, both short and long term. This insurance provides the financial safety that if this situation were to arise, you can still pay your bills and provide for your family.

Critical Illness Cover

Critical Illness Cover does sound similar to income protection but it is a product in its own right. Critical illness cover provides cover for many serious illnesses and different policies cover different illnesses, meaning you have the freedom to choose which matter to you. Some policies even provide payouts if your children were to fall seriously ill. You can opt for critical illness cover if perhaps there is a history of cancer within the family and want to ensure you have plans in place in case you are affected, too.

Both Income Protection Insurance and Critical Illness provide cover for illness or injury. There are, however, a few differences. For example,  critical illness cover provides cover for specific illnesses and injuries, while income protection insurance covers practically any medical condition that prevents you from working and earning an income. Also, you can claim as many times as you need to with income protection insurance, however, critical illness cover only allows you to claim once prior to the policy terminating. Lastly, critical illness cover can be taken out alongside a life insurance policy and as a joint policy with your partner, income protection on the other hand, is an individual plan.

Family Income Benefit

Family income benefit provides a regular monthly or annual income for your family in the event of you passing away. It is designed to assist with living costs, such as bills and regular outgoings, over paying off a mortgage or debts. It runs within a set term whereby if you die within this period, a tax-free income is regularly paid to your family until the term ends. If you have a young family this is highly beneficial as you can keep this policy running until they are grown ups and have their own income to fall back on.

Although sounding very similar to life insurance, they have their differences. Life insurance pays out a lump sum if you pass away within the term, however, family income benefit is based on regular payments. Payments are more attractive for many families as large lump sums of money can be overwhelming and are very easily mismanages. It also differs to income protection insurance as this pays out in the event of death,  as opposed to if you are unable to work through illness or injury.

There are a lot of different factors that determine the prices of these policies and it all comes down to the individual and their personal circumstances. If you have questions about any of the products mentioned above – and any others you might be considering – then get in touch with LifeSearch for award-winning free advice from their team. Life insurance might seem a little daunting as there’s a lot of options, but it needn’t be and it’s definitely worth getting to the bottom of.

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