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Life Insurance

Life insurance is not for everyone, though if your children, partner or other relatives depend on your income to cover the mortgage or other living expenses, then you probably would want life insurance.

Life insurance can help provide a safety net for your family. If you were to die, life insurance could help your family in a number of ways:

• Pay off or reduce a mortgage and other outstanding debts, such as loans or credit cards.
• Replace lost income and help with everyday living costs, giving your family greater financial security.
• Support children or other dependants, including childcare, education and other future expenses.
• Provide financial support for a partner, including later in life or during retirement.
• Cover funeral and other final expenses.
• Leave money to your family or other loved ones, providing additional financial support or a legacy.

Everyone's circumstances are different, so the amount and type of life insurance you may need will depend on your financial commitments, the people who rely on you and the support you'd like to leave behind.

There are several types of life insurance and related cover available. The right option will depend on factors such as how long you need protection, how much cover you want and what you'd like the policy to help protect.

• Level term life cover: Provides a fixed amount of cover for a set period. If you die during the policy term and a successful claim is made, the policy pays out the agreed lump sum. This can be useful if you want the amount of cover to remain the same throughout the term.
• Decreasing term life cover: The amount of cover gradually reduces during the policy term. It is commonly used to help protect a repayment mortgage or other reducing debt, where the outstanding balance is also expected to fall over time. Decreasing cover is typically cheaper than an equivalent level term policy.
• Increasing term life cover: The amount of cover increases over time, typically in line with inflation, helping to protect the real value of your payout as the cost of living rises. Your premiums will normally increase as your cover increases.
• Critical illness cover: Although not life insurance itself, Critical illness cover can provide additional financial protection by paying a lump sum following a successful claim if you're diagnosed with, or undergo specified treatment for, a critical illness covered by the policy. The illnesses and conditions covered vary between policies and providers.
• Whole life cover: Unlike term life insurance, whole of life cover has no fixed policy term and is designed to provide cover for the rest of your life, provided the policy terms are met and required premiums are maintained. It pays a lump sum following a successful claim when you die.
• Joint life cover: Covers two people under one policy and is often taken out by couples. Most joint life policies pay out once following the first successful claim, after which the policy ends. Alternatively, two separate individual policies can provide each person with their own cover and the potential for two separate payouts.
• Over 50s life cover: A type of whole of life insurance designed specifically for people over 50. These policies commonly offer guaranteed acceptance within specified age limits without requiring a medical examination. They typically provide a smaller fixed lump sum that loved ones can use as they choose, such as towards funeral costs, outstanding financial commitments or as money left to family.

The aim is to have enough cover to help replace the financial support you would have provided if you were no longer around. A simple rule of thumb is to consider life insurance cover of around 10 times your annual income, but the amount you actually need could be higher or lower depending on your individual financial circumstances and what you want the payout to provide for.

Some important considerations include:

• Your mortgage and other outstanding debts, such as loans and credit cards.
• How much of your income your household might need to replace, and for how long.
• Children or other dependants, including childcare, education and other future expenses.
• Financial support for a partner, including everyday living costs and later-life or retirement needs.
• Major future financial commitments you would like the payout to help cover.
• Money you'd like to leave to your family or other loved ones.
• Existing savings, investments, workplace benefits or life insurance that could already provide some financial support.
• How much you can comfortably afford to pay in monthly premiums.

For example, someone with a large mortgage, young children and a household that depends heavily on their income may need considerably more cover than someone whose mortgage has been repaid and whose children are financially independent. Equally, someone approaching or in retirement may still want meaningful cover to support a partner, meet outstanding financial commitments or leave money to their family.

The amount of cover you choose will affect the cost of your policy, so it's important to consider the protection you need while ensuring your premiums remain affordable. Comparing quotes from different insurers can also help you find suitable cover at a competitive price.