Life insurance is one of those financial products that most people have heard of but relatively few truly understand the different types that are available. It is a critical feature of modern life, and therefore it is important to know what is required and what products are available to meet these requirements. Developing a clear understanding of this area is the best way of ensuring you have the right arrangements in place, as well as guaranteeing the best value for your money.
These are some of the most common questions people have about life insurance:
- What exactly is life insurance? Also known as life assurance or term assurance, life insurance is a means by which an individual can protect his or her family financially if death occurs prematurely. During what is a naturally difficult and traumatic time, it is designed to take care of essential financial arrangements such as mortgage payments, general household bills, school and university fees and childcare costs.
- How does life insurance work? In the simplest terms, it is a contract between an individual and an insurer that provides a cash payout if the individual dies during the life of the policy. Level term assurance is designed to help provide general financial support for the family of someone who has passed away, while mortgage life insurance, as the name suggests, is designed specifically to help pay off a mortgage. Critical illness cover can also usually be added to life insurance policies, and this will provide for payouts if an individual is diagnosed with a critical illness, as defined in the policy.
- What are the benefits? Our families are invariably our biggest priority in life and we put a huge amount of effort into providing for them while we are alive. It can be a great comfort therefore to know that they will still be taken care of should the worst happen. Not having to worry about essential costs will allow them to get on with the grieving and healing process that follows bereavement.
- How do you get life insurance? The first step is to get a quote. There is a huge range of policies on the market, and while this can seem dauntingly complex, it actually means it is possible to make an investment that is tailored to meet your specific personal requirements and is affordable in relation to your income. Perhaps the most common question for most people is whether a life insurance policy is really something they need to invest in themselves. Defining your individual circumstances, such as your occupation and any risky hobbies as well as your financial commitments, will give you an idea of the right product for you.
The right investment
Life insurance and the potential situations for which it provides can seem like morbid subjects to think about. However, it can prove to be an extremely sensible and beneficial investment. For that reason alone, it is important to know exactly what it involves and therefore understand whether it is the right investment for you.