The basic principle of life insurance is easy to understand: a family will receive money in the event of a policy holder’s unexpected death, giving them reassurance that they will have the means to pay things like funeral costs and to cover things like mortgage payments or other large debts.
However, there are many different types of life insurance that suit different people depending on their circumstances. Here’s some common questions about life insurance answered:
How does Life Insurance work?
That depends on the type but all are designed to pay out on the death of the insured person. For example, there is term life insurance, which is typically lower cost and covers a policy holder for a specific time. If they die during that time, then the pay-out is made.
It is important that you speak with a fully qualified Protection Adviser to make sure that you are selecting the right options at outset because it is unlikely that you will be able to include this at a later date.
What does Life Insurance cover?
This depends on the policy, but it will usually pay out a large amount intended to cover outstanding debts like mortgages. Some policies also have provisions for critical illness, meaning it will cover lost earnings if the policy holder is ill or incapacitated for an extended period. There may also be provisions for covering funeral payments.
Do I need Life Insurance?
That is a decision only you can make, but many people begin to consider life insurance as they come to the end of their working lives, while younger people tend to begin to consider it when they start a family or buy a house. Generally, if you have large debts that your family may struggle to take on if you pass, then it’s probably a good idea to take out a life insurance policy.
Life Insurance benefits
Aside from the comfort that life insurance provides to both the policy holder and their family, there may be other financial benefits too. Life insurance policies can be arranged in a Trust, which ensures that the proceeds of any claim are paid quickly and tax-free. Some policies may even cover inheritance tax, so the full value of any assets outside of the policy can maintain their value as well.
David Williams IFA Life Insurance brokers can help you choose the right life insurance policy for you, your family, and your assets. Get in touch via our contact form or on 01604 250280.