IDEAL for those looking to navigate uncertain times with a little more clarity.
It’s a tale as old as time itself; staring into the abyss and wondering what happens once the lights go out. It’s natural to be gripped by a certain fearful feeling when contemplating life’s biggest question, and then to sweep it under the carpet along with all the other dust we eventually become.
As reported by the FT “Overall, an estimated 37 per cent, or 19.5m, of the UK’s adult population has bought or thought about buying life insurance to date” and it seems like ignorance is bliss in this department. But life insurance policies come with more benefits than you may have initially realised. If you’re considering investing in one, then let’s first look at the reasons why that might be a good idea; here are 5 of the benefits of life insurance.
LIFE INSURANCE 101
First, let’s take a step back before we dive into those benefits and look at what life insurance actually is.
Sometimes called ‘life or death cover’, life insurance is a financial product which involves paying a monthly premium to an insurance company – the amount of which is dependent on your age, overall health, lifestyle, family medical history occupation and other mitigating factors – who pledge to take care of an element of your finances when you die. This could be, for instance, paying off your mortgage, covering the cost of your funeral, or helping your spouse with a regular income which you would have otherwise provided.
The average cost of the premium for a healthy adult between the ages of 18 and 70 is around $67.88 (£54) a month for a $250’000 life insurance policy, which is equivalent to £198’715.
Though the payout doesn’t happen until you pass away, the benefits shouldn’t be overlooked. Life insurance is designed to protect your loved ones from the financial strain that will arise when they no longer rely on your income to survive.
TYPES OF INSURANCE POLICIES
There are several types of life insurance policy to consider. Here are four of the most common:
- Term life insurance – This is the most popular type of life insurance and will provide cover for a fixed period. A lot of the time, policyholders will reduce their premiums by agreeing to decrease term life insurance. However, the potential payout will also come down, typically in line with a repayment mortgage.
- Whole life insurance – This results in a payout when you die. Even so, this reassuring security comes at a price and you’ll be paying premiums late into life.
- Convertible term insurance – This offers a fixed term policy that can be changed to a whole of life or endowment policy at the end of term without having to provide additional medical evidence.
- Over 50s life insurance – This type of policy is designed for people aged-50-79 and doesn’t involve questions or an assessment of the applicant’s medical health or history.
CUT TO THE CHASE, WHAT ABOUT THOSE BENEFITS YOU MENTIONED?
If you’re still on the fence about getting a policy, then here are those 5 benefits we promised earlier.
PEACE OF MIND
If you ever find yourself in a position where your chances of surviving are uncertain, or if you simply want to enjoy your retirement with that extra blanket of security, you can at least know that your family won’t struggle financially after you are gone. This will make your final days less painful, and can afford you time and headspace to focus on going out with dignity, surrounding by loved ones who will be taken care of once you’re gone.
SUPPORT YOUR FAMILY
More than simply covering the basic necessities and helping your family survive, life insurance payouts can actually help fund their goals and dreams. The average life insurance payout in the UK is £51’500; an amount not to be sniffed at, we think, when the monthly fee is little more than an extra phone bill or Sky TV subscription. It’s money that can be used to finish paying out the house, buy a new house, or fund your kid’s education.
LIVING BENEFITS
Life insurance policies often come with many potential living benefits. For example, if you are diagnosed with a terminal condition, your life insurance may pay out partially or completely right away, so that you can use the money to pay medical bills and even to have fun with your family in your final years or months.
ADDITIONAL COVERAGE
Life insurance isn’t necessarily a stand-alone premium, separated from your other outgoings. In fact, you can often get other types of insurance bundled in with your life insurance, saving you a packet by doing so. Disability insurance is a popular choice; it replaces your salary in case you are rendered unable to work for long periods of time and is often combined with life insurance with lower premiums than if they were separated.
FINANCIAL TOOLS
Having life insurance can be financially advantageous in many ways. You may be able to borrow money from your insurance policy, withdraw some of your premiums at a later stage, and life insurance payouts are usually tax-free. All reasons to consider investing in your family’s future once you’re gone, we think.
You can learn more about life insurance and compare prices by visiting Insurance Hero.