Life Insurance
Posted on May 28, 2010
Filed Under Loans, Personal Finance | Leave a Comment
Life insurance is split into two principal policy types, term insurance and whole of life insurance.
Term life insurance is a low cost solution in the majority of cases and will make a pay out if the insurance holder dies before an agreed time period has expired. If the policy owner survives the agreed period, known as as the term, then the coverage runs out and no payment is made.
Whole of life insurance, often known as investment life insurance, insures you for your entire life as long as you keep paying the insurance premiums. Generally the premiums are invested in the financial markets with the aim of achieving growth over time. Therefore the longer you live the bigger the payout on your death though you will of course have payed more in premiums.
Life insurance premiums can be paid monthly or in one lump sum every year. The amount paid, known as the premium, may be fixed for the entire policy term or some plans provide adjustable premiums based on changing requirements or circumstances.
You can also get life insurance to insure unsettled mortgages or loans should you die before they are paid back. This is very similar to term life insurance except the amount of cover reduces over the duration of the term to equal the outstanding amount of the mortgage or loan that is covered. If you survive the term no pay out is made.
Life Insurance Buying Strategies
When comparing or buying life insurance you should shop around to obtain the best premium and you also need to ensure the policy covers your needs. There are many types of policies available and you have to make sure you understand fully what each policy covers, what administrative fees apply, how risky an investment plan could be, how much flexibility is available in the premium schedule and also the pay out you can expect.
People who smoke will invariably pay a larger premium so you should think of giving up prior to making your application. You will need to be smoke free for a minimum of twelve months and you’ll need to be honest as the insurance company is not going to make a pay out if it can find proof you started smoking again during the policy term.
For any requirement besides standard term life insurance it is always safer to talk to a qualified and FSA (Financial Services Authority) authorised advisor before you choose a policy. Only buy from insurers or insurance brokers regulated by the FSA. These insurers are obliged to give you standard format documents that fully describe any insurance policy recommended.
If you’re simply looking for term life insurance you might consider a few of the better life insurance comparison sites available online. These will quickly deliver quotations from a lot of the top insurance providers and some services allow you to complete the application process online.
This article is for informational purposes only. You should talk to a qualified and authorised insurance advisor before buying any financial product or service.
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