Life is full of uncertainty. So, we need to know that our family is financially protected should the worst happen. Although cheap life assurance is not necessary for everyone, there are many instances when we need coverage. Here are the most popular forms of life insurance in the UK.
Why do we need life insurance?
Even the fittest and healthiest people can suffer from a life-threatening illness or die from a massive heart attack. It is a sobering thought. However, you need to take out a single or joint life insurance policy to protect your family. It does not alleviate your sense of loss, but worrying about paying your mortgage or how you will feed your family is the last thing you need when you are grieving.
Types of life insurance in the UK
Level term life assurance
Term life insurance quotes provide a defined lump sum payment if you were to pass away within a defined term. For example, a 25-year term policy for £100,000 would pay out the full amount regardless of whether you died in year one or 25 of the policy. The younger you are when you commence the policy, the cheaper the premiums. Decreasing term life insurance
A variation of a term policy where the lump sum payment is gradually reduced each year. It is often referred to as mortgage life insurance because it is taken out by homeowners who have a repayment mortgage and owe less after each year. Increasing term insurance
Another term insurance variation where the lump sum payment rises to compensate for inflation or higher expenses. Critical illness insurance
Often taken out inconjunction with term cover. If you were to suffer from a life-threatening illess, such as cancer or kidney failure, the policy would pay out the full sum of money within the defined term of the agreement. Family income benefit
If your partner does not want to make any investment decisions, a family income policy is the ideal solution. He will receive a tax-free payment each month for the remainder of the defined term. For example, if your policy was taken out for 25 years and you died at the end of year 20, the named benefactor would receive a monthly payment for the remaining 5 years. Whole of life insurance
A whole life insurance policy will provide a lump sum payment, regardless of whether you die when you are 30 or 110. Some of your premium goes towards insuring you against the risk of death and some is invested so that future premiums can be met when they become more expensive. This form of coverage is often used for inheritance tax planning.