Purchasing life insurance is one of the most importance decisions in our life. In order to get the right quotes, we have to consider all sides, all angles and all conditions. That’s why we always have questions about theses life insurance quotes. Here are some frequent asked questions of purchasers, it sure can help you. Let’s check it.
What does life insurance cover?
Life insurance basically pays out on
death. It’s intended to help to provide for your loved ones when they
can no longer rely on your income. The pay-out can be used to clear any
outstanding debts, such as a mortgage, or to cover everyday expenses. It
can even pay for the funeral.
Should I bother with life insurance?
If you are single with no dependents,
you probably don’t need to worry too much about life insurance. But if
you have a partner who would struggle to cope financially after your
death, or if you have children, then life insurance can offer a
financial lifeline.
Can I get life insurance through my employer?
Your employer might offer something
called death-in-service benefit, which normally pays a lump sum of four
times your annual salary if you die while still employed by the firm. It
can be a valuable benefit, but you might need to take out additional
cover depending on your needs.
What is term insurance?
Term insurance is the most common type
of life insurance and pays out only if you die within the term. For
example, you might take out a 25-year policy so your family could claim
if you were to die within 25 years. Of course, if you died later, there
would be no payout.
Does the payout stay the same no matter when you die?
If you buy level term insurance, the
pay-out is the same whether you die in year one or year 25. An
alternative is decreasing term insurance, where the pay-out gradually
gets smaller over the term.
For example, the policy might pay out
£100,000 if you died in year one, but only £1,000 if you died in year
25. Decreasing term insurance is often linked to a repayment mortgage
because the amount you owe the lender also reduces over time.
Another option is family income benefit,
which pays a monthly income from the time a claim is made to the end of
the policy term. This is cheaper than level or decreasing term
insurance.
How do I decide the length of the term?
It’s really up to you. You might want to
make sure the life policy lasts as long as your mortgage. Or maybe you
would prefer to link the term to the age of your children so that it
does not expire until they reach 18, or perhaps when they have finished
university. Your own age will also have an impact on your decision.
Can I buy life insurance that will pay out whenever I die?
Yes. If you want to be confident that
your family will be able to claim no matter when you die, you can take
out whole of life assurance. You are not then restricted by any policy
term. It is, however, worth bearing in mind that whole of life assurance
is usually more expensive than term insurance.
Are life insurance premiums fixed?
Premiums for level and decreasing term
insurance and family income benefit policies are usually ‘guaranteed’.
In other words they are fixed throughout the policy term. However, you
need to check the small print as some firms offer ‘reviewable’ premiums,
which are reviewed every five or 10 years and usually go up.
Whole of life assurance is different
because the policy is typically linked to an investment – and if the
investment does not perform well, the insurer is entitled to increase
the premiums.
How much life insurance do I need?
The amount of cover – known as the sum
insured – depends largely on your personal circumstances. For example,
if you have a big mortgage and a large family, you will need more cover
than someone who has a small home loan and one child.
Most often recommend a sum assured
equivalent to 10 times your annual income, though you should carry out
more detailed calculations to make sure you are properly covered.
How much does life insurance cost?
Premiums vary according to the type of
policy and the size of the sum insured. Insurers also take into account
the risk of a claim when setting premiums. So, life insurance is more
expensive for older people. Similarly, a customer in a poor state of
health can expect to pay a higher premium.
Your occupation, hobbies, and other
lifestyle factors such as your weight and fitness also help to determine
the cost of cover. Insurers even look at your postcode as people in
some areas of the country are statistically more likely to claim.
