There are so many different types of life insurance policies available on the market that it can be difficult to find out which policy is right for you. However, all policies have one thing in common, and that is to financially protect your family should you die.
Level term life insurance is one of the most popular types of life insurance. With this type of policy the amount of cover provided will not change throughout the term of the policy. When you initially take out cover you choose how long you wish the policy to run for, and the premiums remain fixed during this period as does the amount payable upon your death; they are not linked to inflation. If you do not die during the term of the policy it simply lapses and a further policy would have to be taken out should you wish your life insurance cover to continue.
Level term life insurance is aimed at people who have considerable debts, including a mortgage, that would need to be paid off should they die, or at individuals whose family relies on them financially and would struggle to cope if they were no longer there. In addition, a term life insurance payout could be used to pay for a child’s education, or alternatively, for a dependent’s future house purchase. However, if you are looking specifically for a policy to pay off a repayment mortgage a decreasing term life insurance policy may be more suitable as this type of policy issues a payout in line with the amount left owing on your mortgage and thus saves you money as the premiums also decrease over time.
Before taking out level term life insurance it is vitally important that you read carefully the full terms and conditions of the policy to ensure that it meets your needs in full. You will be asked a number of questions and you must answer these honestly as any omissions may invalidate your policy should a claim be made. Once your policy is in place it is also important that you review it regularly as your circumstances can change over time sometimes resulting in a policy that is not fit for purpose.
Everyone’s circumstances are different therefore term life insurance is tailored to meet your particular requirements. You need to take into account a number of factors including mortgage debts and childcare expenses when deciding how much cover you need. You also need to look realistically at how much you can afford to pay in premiums.
When a term life insurance policy comes to an end and no claim has been made then you will receive no payout. If, during the term of the policy, a claim is made then the policy will simply cease.
People have different reasons for taking out term life insurance, but often they are prompted to do so when they purchase a property and take out a mortgage. It is, therefore, common for policies to be taken out over a period of twenty-five years which is equivalent to the length of time that most mortgages run for. Term life insurance taken out for this purpose will ensure that your dependents won’t have to struggle to make monthly mortgage payments should the worst happen, nor will they have to move to a cheaper property. However, term life insurance is not solely aimed at property owners; it can also be used to pay off a variety of different debts.
Whatever your reasons for taking out a term life insurance policy it is important that you only pay for cover that you actually need rather than to provide a huge windfall for your family should you die. It may seem appealing to take out cover for a large sum to leave to your loved ones, but consider the fact that this would result it extremely high premiums; the greater the level of cover that you have, the higher your premiums will be.
Term life insurance has a number of benefits, but it may not be the right choice for everyone. It is ideal if you are happy to accept a specific amount over a certain timeframe, but if you are looking for life insurance that will cover a debt that will decrease over the years, for example, a mortgage, then decreasing life cover may be a better option. There is also another type of policy available called a family income benefit policy which pays out a monthly income to your dependents from the day that a claim is made until the end of the policy term. This is a good choice if you prefer to provide your family with a monthly income rather than a lump sum in the event of your death.
Term life insurance is just one of the many different policies currently on offer from insurance providers. Think very carefully about the type of cover that you need to protect your family and to suit your own personal circumstances. Seek advice if necessary from a professional in the field if you are unsure, and also examine your policy on a regular basis to check that the cover provided is still adequate.