Choosing Life Insurance

Simply and gravely put, life insurance provides a lump sum of money in the event of your death. Working out what level of life insurance cover you need really depends on how much money you will need to protect your dependents should the worst happen. If you are taking out a mortgage, lenders will insist that you have life insurance cover for at least the mortgage amount.

Whole of life insurance

As the name suggests, this cover lasts for the entire duration of your life and the premium payments (usually paid monthly) remain the same over the entire policy. This type of policy is almost guaranteed to pay out (unless you are planning to live forever!), and for this reason it is typically the most expensive.

Term insurance – level cover

This is a more affordable way to give you assurance that your loved ones will be covered after you’re gone. Term insurance provides cover for a set period of time - usually the duration of your mortgage. This means that your dependants will have the funds to pay off your mortgage debt in the event of your death.

Decreasing term insurance

This type of policy is similar to term insurance described above, but the total cover (the amount that would be paid in the event of your death) reduces over time. This is typically used to cover your mortgage amount, so as you pay off a small part of your mortgage each month, the amount of life insurance you need reduces. Reducing term insurance aims to keep your cover in line with your remaining mortgage amount.

Family income benefit insurance

Another way of covering your loved ones is by having a family income benefit policy. This is another form of life insurance but is intended to replace the income lost should the breadwinner die during the term of the mortgage, providing a regular monthly payment instead of a single lump sum pay-out. Its typically costed to pay out until a child reaches a predetermined age – 18 or 21.

Critical illness cover

This is a popular option that is offered at an extra cost when taking out life insurance, however you can also have it as a separate policy if you wish. Critical illness cover pays out in the event of a critical illness instead of death, which minimises the financial impact on you and your family if you become critically ill. The details are important here - read the fine print to understand which illnesses are covered along with any survival clauses.

Income protection

How would you pay the bills if you were sick or accidentally injured and had no source of income? Designed to replace your income with tax free regular payments in the event of accident or sickness, it usually covers up to 50 or 60% of your gross income although cover can be provided even if you are not working.

It will provide a long-term solution for loss of income due to accident or sickness. It pays until death, retirement or you have recovered and are able to return to work, whichever occurs first.

Get quotes

As we always suggest, shop around. Get a few quotes but ensure the details you give are accurate. Compare like for like cover to get the best deal for you or better still speak to an advisor who is a specialist and can design the right cover for you.  Your mortgage advisor will arrange this for you free of charge.