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Different types of life insurance

Different types of life insurance

When thinking about life insurance, it’s important to understand all of your options – starting with the question of whether you’d like the cover amount to stay the same throughout the length of a policy, or decrease over time. Our simple guide explains the difference between the three main types of life insurance.

Kamran Altaf
From the Life team
minute read
posted 3 DECEMBER 2019

What are the main types of life insurance?

The three main types of policy  to choose between are:

  • Level-term insurance. This type of policy offers a fixed amount of money, for a fixed period of time, that you pre-select. If you pass away within the chosen time period, the policy pays out a lump sum to your beneficiaries. This is useful if you want to leave your loved ones a pay-out so that they can continue to meet debts, such as bills or an interest-only mortgage. If you survive the policy term, this type of cover won’t usually pay out.
  • Decreasing-term cover. Decreasing term insurance is another type of fixed term policy aimed at people whose financial commitments reduce over time. For example, if you’re repaying a mortgage. The amount of money needed after you pass away to cover the mortgage will decrease as your mortgage decreases. Learn more about life insurance and mortgages.
  • Whole of life cover. Also called whole of life assurance, this policy lasts as long as you do and always pays out if you pass away (as long as you’re kept up with monthly payments). They’re often used to offset inheritance tax payments. While this type of policy could offer you certainty that there’ll be a financial payment to your loved ones, the downside is, for that reason, they’re more expensive than say decreasing term cover.

What other types of life insurance cover are there?

There’s a wide range of other types of life insurance policies to shop around for. The most suitable one for you will depend on your individual circumstances. These include critical illness cover, joint life policies, pension term insurance, family income cover and over 50s life insurance.

Which policy should I choose?

Deciding which type of life insurance is right for you and your family depends on how much money you think you’ll need to support your dependents if you were to pass away. This sum should take into account their living costs, as well as any outstanding debts or repayment plans.

What affects the cost of life insurance?

There are  many things  that affect the monthly premium you’ll pay. As well as the level of cover you want and how long you’d like it to last – your age, family health history and lifestyle will all be taken into account. 

When should I get life insurance?

There’s no such thing as the ‘right’ age to get life insurance. Typically, people tend to think about life insurance after moving house, getting married or having a baby. But, generally speaking, it’s a case of the sooner the better, as you’re more likely to be offered a lower monthly premium when you’re younger as you’re seen as less of a risk to an insurance provider.  

Where can I compare life insurance?

Having a life insurance policy offers you peace of mind that if you were to pass away, you’ll be leaving your dependents with adequate financial support. We’re here to make comparing life insurance cover as quick and simple as it can be. 

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