Understanding Life Insurance

Live in the moment – be sure they’re protected

Life insurance helps you to financially protect those who are important to you. We’re here to help you understand what level of protection might best suit you and your loved ones.

If you have loved ones who depend on your income to cover debts, bills or living expenses, then it may be worth taking out life insurance which is also called life cover. This pays out a cash lump sum and/or a monthly income if you die during the term of the policy. This payment helps to provide some financial support to your dependants or can be used to discharge your own debts when you’re no longer there to.

The best advice for choosing the right Life policy is to shop around. And the right policy for you may not always be the cheapest – it’s important to choose the level of cover that suits your life and your circumstances, at the best possible price. It’s also important to review your policy regularly, particularly if your circumstances change. A financial adviser can help you to understand your needs and assess your options.

What types of life cover are there?

There are different types of life cover – single life, joint life, dual life. It’s important to choose the type that suits your requirements so let’s look at what each mean:

• Single Life is cover on one life only and the benefit is payable when that person dies.

• Joint Life is cover on two lives and benefit is usually paid when the first death occurs.

• Dual Life is cover on two lives where there is a payment made for each of the two lives covered by the policy.

Mortgage Protection Cover

This type of life insurance is taken out with the intention of repaying your mortgage if you should die before it is repaid. As your mortgage balance reduces, the amount of cover your life policy covers also reduces over time, usually ending at the same time as the mortgage term. If the life covered by the policy ends before the mortgage is repaid, the policy covers the outstanding balance which is repaid to the mortgage lender.

When is life cover important

• Just married or buying a property together, particularly if there are borrowings involved

• A young couple just starting out

• Parents raising a young family

• Looking after a dependent sibling or parent

• A family starting to think about the future

• A retiree who may survive their partner and need financial support

What to consider when choosing a life policy

• Who are your financial dependants – your spouse or partner, children, brother, sister, parents?

• What kind financial support your family will need in the future?

• What kind of costs will need to be covered – household bills, living expenses, mortgage, education, debts or loans, funeral costs?

• Can you afford to pay regular premiums and if so, how much can you afford?

• Can you afford to pay a lump sum?

• What factors might affect your premiums – life cover policies look at your age, occupation, lifestyle and pre-existing medical conditions

• Do you want to include specified illness cover?

Insurance Mythbusters

PLEASE NOTE

Insurance is a very detailed subject and the outlines above are not intended to be exhaustive. Instead we recommend that you ask your insurer or broker to explain each one in detail.