Life Insurance

What is life insurance?

Many people think life insurance is complicated, but it’s actually quite simple – you pay into an insurance policy every month, knowing it will pay out a sum of money to your family if you die.

If something happens to you, these payouts can make a real difference to spouses, children and anyone in your family dependent on your income. It can help your loved ones cover the cost of a mortgage, childcare fees, pay off debt or help with the cost of a funeral. They can have peace of mind that there’s help to lift a financial burden when you’re gone.

There are several types of life insurance suitable for different circumstances and stages of life. It is important to pick carefully so that the policy meets your needs and those of your family,

Different types of life insurance

Level cover

Perhaps one of the best-known terms of life insurance, level cover provides an exact amount of coverage that doesn’t change. This means that if you die at any point during the term of your policy, your family will receive the same amount of money, regardless of inflation or how close the policy is to its end.

As with all insurance policies, conditions and exclusions will apply.

Decreasing cover

If your mortgage or other debts are going to shrink over time, or you can see a point when your family will become financially independent, decreasing cover can be a good-value insurance option.

With this type, the payout on death reduces gradually over time until the policy ends. Taking out this sort of policy ensures that a gradually reducing repayment mortgage can be cleared if you die.

Another option is Family income benefit (Life Cover)

What is family income benefit?

A Family Income Benefit (FIB) policy runs for a set time known as the term. If you die within this period, it pays out a regular tax-free income until the term ends. For wage earners worried about helping their family with day-to-day living costs in the event of their death, family income benefit could be a solution as its designed to replace missing earnings.

Why you might want it

Household bills will always need to be paid. A sudden loss of income can make it tough to manage these and other expenses, this is where family income benefit can help to provide extra support.

If you have a young family, you might want cover to run until your children are grown up, using the income for everyday expenses or specific items such as school or university fees.