A Look At Life Insurance

The value of a having a good life insurance policy will differ greatly according to who you ask. For many it is vital that the support is there for family should anything bad happen. For others, it is not as important. Often, existing financial situations can play a large factor. Moolr take a look at life insurance.

What It Is

Life Insurance is an insurance policy that will pay out to your nominated family/dependants should you die. The insurer may link it to the value of something big that you owe, like your mortgage. Thus it might be the same length in years as your outstanding mortgage. In this situation it would cover the amount outstanding on your mortgage at a point in time. Alternatively, the policy might pay out a nominal amount that you wish to leave to dependants if you die.

An example

Let’s say you own a house worth £400k, with £200k left to repay on the mortgage. A good position to be in with 50% of the value of the house owned and 50% left to repay. The mortgage has 20 years left. You could take a life insurance policy for £200k for 20 years. If you did die the insurer would pay off the mortgage in full. Thus, the beneficiaries in the will would receive the house mortgage free.

Many leave the beneficiary details in your will, or in the details of the life insurance policy. The cost of a policy is determined by a number of factors including your age, health and lifestyle.

Death in Service

You might also have a death in service policy as part of your employed benefits . This is a monetary value linked to your salary. The insurer will pay out if you die during your employment. This is often a significant amount multiple times the annual salary.

Term Or Whole Life Insurance?

Term life insurance provides life insurance coverage for a specific amount of time.  Generally, term life insurance plans are much more affordable than whole life insurance. This is because the term life policy has no cash value until you or your spouse passes away. If you are not flush with cash, it is the best option I would argue. Whole life insurance can be a bad investment, as the majority of us do not need a permanent death benefit. what’s more, we do not have the large amounts of money on hand to make these policies a reasonable investment. 

Do I need life insurance?

Whether you need life insurance will depend on your individual circumstances. For example, life insurance can provide peace of mind for people with children, partners, or spouses that depend on them financially, as well as people with a mortgage on the family house.