Life Insurance - A Matter of Life And Death
Buying life insurance can put you in mind of death – and that’s not a pleasant thought. It’s all too tempting to put it off for another time but because people rely on you for money, life insurance is essential. And the younger you are when you take out the policy the lower will be the premiums. So don’t delay, look into it today.
Maybe you hesitate over considering life insurance because you have an endowment mortgage that will pay off that biggest of debts, but what of your other commitments? How will your nearest and dearest cope with day-to-day living expenses and all the ongoing household bills?
Being without life insurance could mean your family struggling to get by if the worst were to happen to you. With the appropriate policy in place, you could relieve yourself of this worry and make sure they have enough money to redeem the mortgage debt and have money for every day.
The average family has two major financial commitments in the event of a breadwinners’ death: Repaying any secured debt such as a mortgage, and any unsecured debt such as credit cards or overdrafts. Then secondly of course the family will need income to live on. It is important to buy the insurance policy best suited to your particular needs.
The simplest and most straightforward type of life insurance is known as ‘term insurance’. With this you calculate the sum of money your family needs and how long you believe that need will last. If you die within this time period the policy pays out to your survivors– if you live to the end of the period, it doesn't pay out anything.
There are three options when buying term insurance: ‘level-term’, ‘decreasing-term’ and the most popular option, a combination of both level and decreasing term insurance.
With a level-term policy, the sum your beneficiaries get in the event of your death is always the same regardless of when, in the policy lifetime, a claim is made. This is a particularly simple and effective form of family protection when matched to particular debt, such as an interest only mortgage.
It is a good idea to match the benefit sums of your life insurance policies to your various family commitments. A decreasing term policy is ready made to go alongside a normal repayment mortgage. As the outstanding mortgage debt reduces over time so does the benefit paid on your insurance policy. This is a more economical option than level term.
The financial situation of most families is a complicated and ad hoc mixture of assets and liabilities. Life insurance policies to should reflect this and a combination of both fixed and level term life insurance will do this.
The whole situation needs regular and thorough review to make sure it keeps up with your family needs. This means it always gives you the peace of mind that is your main motivation for buying life insurance in the first place.
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