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Different Types of Life Insurance
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Simple level term insurance – This is where your policy will last for a set number of years. It’s simple, and affordable for most people. Suitable for those with dependants and a mortgage.
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Decreasing term insurance – Your policy will last for a set number of years in this instance. It only pays out if you die during the set term. However, for each year that passes the payout decreases. This is usually very affordable but will only usually cover your mortgage balance.
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Family income benefit insurance – Similar to a decreasing term, but pays out a regular income for the remaining term. This is usually an affordable option suited to families who could suffer financially should the main provider die.
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Whole of life insurance – This policy covers you for the whole of your life, and your dependants get a payout no matter when you die. Providing you keep up with your premiums the policy will pay out. This option is much more expensive, however.
Want to Use Life Insurance to Cover a Mortgage?
If your life insurance policy is to ensure that your mortgage get’s paid off when you die, you’ll need to make sure the level of cover you choose matches your mortgage debt. If it’s going to take you another 20 years to pay off your mortgage, that’s what your insurance term should be.
There are the best policies for paying off your mortgage:
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Level term insurance – Pays out a fixed sum if you die during the agreed term. If your mortgage is interest only (where the total debt never reduces) a level term policy can help you.
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Decreasing term insurance – The potential payout will decrease each year with this policy. If you have a repayment mortgage, this is most suitable.
Providing Annual Income to Your Family?
Family income benefit insurance is suitable for providing annual income for you family. They could also mean:
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Possibly lower premiums.
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Guaranteed income.
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The peace of mind that comes with receiving a regular set amount.
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No risk of spending a lump sum at once.
Here is a useful guide for those over 40.
How Much Cover do You Really Need?
To find out how much cover you really need, you need to:
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Add up your debts and expenses.
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Work out the expenses you wish to cover, like monthly outgoings and the cost of putting your children through university.
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Make sure you don’t already have cover in a benefits package, and if you do what will work in harmony with that.
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You can then work out the cover you need using the information above. An alternative method is to multiply what you earn in a year by 20.
Work everything out to the best of your abilities so you don’t end up under/over covering yourself. Nobody likes to think about dying but sometimes it’s necessary to protect our families. Thanks for reading!