Engaged Solutions shares some of their insurance expertise to shed light on what life insurance covers and how to get the right policy.
You might have been told in the past that you should get life insurance and, naturally, wondered why? After all, you won’t be here anymore so all your financial commitments will just disappear, right?
Wrong. Unfortunately, debt doesn’t just go away, so it’s really important that loved ones are properly provided for when you die to help them cope financially when you’re gone.
This is where life insurance comes in, as it covers the policy holder should you or they die.
How does it work?
You pay monthly or annual premiums to ensure that an ‘agreed amount’ is paid to your next of kin, loved ones or ‘estate’ when you die.
Agreed amounts can be a level amount, that never changes, or a decreasing amount to match your mortgage balance as it reduces over the years. However, it’s important to note that the sum will not always match the loan.
You can pay life insurance for a single policy holder or for you and your partner/husband/wife. In most cases, if the policy is for a couple it will only pay out the agreed lump sum when the first person dies.
How much cover will you need?
It’s ultimately down to your individual circumstances. If you have a family with school age children you might want to ensure that you have enough cover to pay off the essentials like school uniforms and university. You may also want to clear your mortgage, cover funeral and legal fees, cover school fees, or just to have a large lump sum left over so that your family will be looked after financially. However, it’s pretty much up to you to select your policy.
What illnesses are covered?
Different policies have different cover provisions for death by illness and you need to know what is and isn’t included. In some instances pre-existing medical conditions will be covered but in others they won’t be. There are also exclusions, different again by provider, and in most cases alcohol or drug abuse related deaths will void the policy.
As with any legal document, read and fully understand the terms and conditions before you take out any Life Insurance policy.
Do you have the right Life Insurance policy for your needs?
With life insurance it’s important to review the policy on a regular basis as your circumstances change. For instance, you might have a baby or get a bigger mortgage, which means you’ll need a different level of cover.
Sometimes you can amend your existing policy to add cover or dependants. Alternatively, you might want to take out a new policy entirely. If you do this, be sure you still have the benefits you enjoyed on your old policy.
How do you review your Life Insurance Policy?
Because the life insurance industry is much more competitive than it used to be, most providers will offer benefits above and beyond a policy that was taken out years ago. This means it’s easy to shop around and compare the different providers.
Be sure to look into Insurance Brokers who are regulated by the FCA and have multiple products, not just one.