What’s the best life insurance for you?
What’s the best life insurance for you?
When it comes to life insurance, there’s lots of choice but no such thing as ‘best’. Getting the best life insurance depends on what’s right for you. Understand what’s out there so you can make the choices that are right for your circumstances.
What life insurance does
Life insurance can protect your loved ones financially if you die. It can’t make up for losing someone, but it can give you peace of mind that your loved ones won’t have to struggle without you.
There are several types of life insurance available. What you choose will depend on your circumstances, how much you can afford and what you need the pay-out to cover.
For example, do you just want to cover the costs of your mortgage or your funeral? Do you need to protect against inheritance tax liability? Or do you want cover that will help your loved ones maintain their lifestyle without you in the long term? Take a look at what’s available and see what life insurance could be best for you. Remember, getting the right life insurance will depend on what’s right for you.
This could be the best life insurance for you if you want the security of knowing your loved ones will get a lump sum pay-out if you die before a certain age – the ‘term’. The pay-out can be used to cover a mortgage or other costs, to help your loved ones maintain their lifestyle.
It’s called level term insurance because, provided you keep up your payments, the pay-out will be the same if you die at any point in the term. You set the pay-out (the sum insured) at the beginning of the term and your premiums stay the same throughout.
If you have financial commitments, like a repayment mortgage, where payments go down over time, decreasing term life insurance could be the best policy for you. This type of insurance, which is sometimes called mortgage life insurance, works in a similar way to level term insurance, except that the lump sum pay-out decreases as the term progresses.
With level and decreasing term life insurance, you might want to take out a new policy if you don’t die during the term. Whole of life insurance – also called life assurance – covers you for as long as you live, provided you keep up your payments. It’s more expensive than term insurance, but it could be best for you if you want the peace of mind of knowing your loved ones will receive a pay-out after your death, whenever it happens. This can be used to cover inheritance tax liabilities when you die.
If you’re in a relationship, you could consider taking out life insurance with your partner. A joint life insurance policy pays out if the first person in the relationship dies within the term. Typically, the surviving partner will get a lump- sum payment – but it doesn’t pay out again when the second partner dies.
For people aged between 50 to 80 who want to be certain of being accepted for life insurance, regardless of health or lifestyle, this type of policy could be a good option. Over 50s policies offer a lump sum payment which could cover funeral costs and other expenses.
Worried how your loved ones would cope if you became injured or seriously ill? Critical illness insurance can cover you financially if you’re affected by one of the conditions listed in the policy, typically cancer, heart attacks and strokes. It can be added to, or combined with, your life insurance. You need to check the policy carefully to see exactly what it will cover and how much it will pay out for different conditions.
This might be the best policy for you if you just want insurance that specifically covers the cost of your funeral. Funeral costs are rocketing – they have increased by 6% each year since 2005 – so these plans can be worthwhile. But you need to check carefully to understand exactly what each individual plan will cover.
Working out how much life insurance you need
Whatever type of life insurance you decide is best for you, you’ll want to make sure the pay-out will cover what you need. And you’ll want to be sure you’re not paying more in premiums than you can afford.
You can compare level term life insurance and decreasing term life insurance with Compare the Market to find the right deal for you.