Life insurance is a unique phenomenon in the insurance world. Usually when you buy an insurance policy, the thing that you’re insuring against is pretty unlikely to happen – a car accident, perhaps, or a break-in at your home. But with life cover you’re insuring against something which absolutely, definitely will happen one day – your own death.
It’s also the most generous and selfless thing you’ll ever buy. Life insurance provides a large sum of money to your partner and/or children, without you around to help them spend it. A lot of people buy a life policy to provide enough money to pay off the mortgage, so that their family won’t have the worry of paying for their home when they aren’t around to help pay the bills.
The funds could also be used to pay for the funeral, cover any debts or support your family in some other way.
When do people need life cover?
There are a few trigger points in life that might make a person think about buying a life policy. Buying a home is one of these, as the cover could mean that your partner or family could inherit a mortgage free home.
Another is getting married or settling down with a partner. A third is starting a family. When there are important people in your life, you might start thinking about what they would need if you weren’t around to earn money and pay for living expenses.
So it can be a pretty important cover to have in place and could mean a great deal to the people left behind if you were to die.
But what’s involved and what do you need to know before you buy it?
How life insurance works
First, there are officially two kinds of cover: life insurance cover and life assurance. Usually, an insurance policy is for a fixed amount of time, say 10, 20 or 25 years, while a life assurance policy is a ‘whole of life’ product. The advantage of setting a time limit on the policy is that it could make it a bit less expensive initially, but that’s because you may not die during the policy term. However you may need to buy another policy when it runs out, which could be more expensive because you’ll be older. An assurance policy will definitely pay out for your family one day. Often these products involve an investment approach, so they are more complex products. You may need to speak to a financial provider to buy one of these.
If you want to compare life products, give comparethemarket.com a try. It only takes on average about three minutes (we’ve timed it!) to get to a list of life insurance quotes tailored to you.
First you need to decide whether you want to look at single cover or joint life insurance. With joint cover you may pay a little more, but you will get a payout upon the death of either of the insured people on the policy. Note that when this type of policy pays out once the policy will end, so the remaining person will need a new policy.
Next you need to set a time limit on the cover – enter the number of years you want it to last. This might match up with the amount of time left on your mortgage, or when you think your children may be independent and no longer need your financial support.
Then you just need to tell us whether you have smoked or used anything containing nicotine in the last 12 months. Because of the health risks linked with smoking, insurers usually charge more for a smoker’s policy.
Next you’ll see a page with all the life insurance quotes from the providers that can cover you, listed in price order with the cheapest life insurance at the top. We make it easy to compare by telling you whether you can buy the policy online, whether it’s a quick process and also if you’ll be covered while you’re in the process of setting up the insurance.
You can also look at how your quotes change by altering how long the policy will last and how much your family would stand to receive.
Another thing you can select is whether you want level term life insurance or decreasing term. Level term will give you the same amount of cover at all times throughout the life of the policy, while with decreasing term cover, the payout becomes lower as time goes on. The idea behind this is that you would need less money as the years pass – maybe because you have paid more of your mortgage off. Decreasing term cover is usually cheaper than level term.
Is it good to buy cheap?
As you look at the different offers on our quote page, make sure you consider more than just the price. Cheap life insurance is not necessarily the best life insurance for you. To buy your policy, just click on the button to go to the insurer to confirm the policy details. But if you have any questions you can also call and talk to one of the Lifesearch experts on the number shown.
One final thing you might want to think about is whether you would also like critical illness cover.
You can usually buy this alongside your life policy – both as a joint and single cover. This cover will pay you a set amount of money if you are diagnosed with a critical illness. Check the policy to see what is and isn’t covered. If a critical illness runs in your family it may be a good idea to take this cover. The money you would receive could help pay for treatment or adaptations to your home, or support your family if you are unable to work.
While these things are difficult to think about and plan for, one day, you or your family may be glad you did.