Life insurance acts as a safety net, providing financial support to your family if you pass away while the insurance is active. It serves various purposes, such as paying off a mortgage, ensuring financial stability for your family in unexpected circumstances, or settling inheritance tax applied to your estate. If you have children, a partner, or debts that you wouldn’t want your loved ones to inherit, life insurance is a prudent consideration.
Understanding the terminology associated with Life Insurance is crucial, although our advisers will help you along the way.
If a policy name includes ‘term’ in its title, it indicates a policy with a specific duration i.e. it has an end date.
Conversely, a ‘whole-of-life’ policy does not have a set duration or end date and will pay out whenever the insured person passes away.
Decreasing-term insurance is generally used to cover mortgages or debts that decrease as they are repaid over time. As the debt reduces, so does the payout of the policy. Due to this feature, this policy is often more cost-effective than others.
Level-term insurance offers a fixed lump-sum throughout the policy’s life. It is suitable for situations where the debt or financial obligation remains constant, such as paying off an interest-only mortgage, where the debt amount doesn’t change during the policy period.
Increasing-term insurance provides a payout that grows over time to align with inflation or other factors. It suits individuals who wish to leave a lump sum that maintains its real value, ensuring beneficiaries receive an amount adjusted for changes in the cost of living.
Whole-of-life insurance ensures lifelong coverage, staying active as long as premiums are paid. It guarantees a payout to beneficiaries whenever the insured person passes away, making it ideal for lifelong financial protection, inheritance planning, or leaving a legacy for loved ones.
Quick fact:
Of UK households with a mortgage, 34% have no life cover
Source: Finder, Life Insurance Statistics – Accessed April 2023
Considering life insurance? Speak with our specialists to safeguard your future and ensure peace of mind for you and your loved ones.