What topics will I discuss with a life insurance advisor?

Key takeaways

• Life insurance is a contract where the insurer pays a sum to your beneficiary upon your death or diagnosis of a terminal illness, provided the policy terms are met

• If you have dependents relying on your income, life insurance is crucial as it can clear debts like a mortgage and provide for daily living costs

• Term life insurance covers a specific period and pays out only if you die within that term, whereas, whole of life insurance guarantees a payout whenever you pass away, provided premiums are paid

• The amount of cover you need depends on factors like outstanding debts, daily living costs, educational expenses, and funeral arrangements

Should I speak to a life insurance advisor?

Life insurance offers a safety net for your family in the event of your untimely death. However, understanding policy options and determining the appropriate cover amount can be a daunting task. Before diving into the world of life insurance, it's crucial to arm yourself with knowledge and seek the expertise of a financial advisor.

What is life insurance?

Life insurance is a contract between you and an insurance provider. Upon your death or the diagnosis of a terminal or critical illness, the insurer pays a predetermined sum to your designated beneficiary, as long as the policy's terms are met. Find out more in our what is life insurance guide.

The primary purpose of life insurance is to offer financial protection to your dependents after you're gone. It can be used to cover outstanding debts, such as a mortgage, and provide for your family's living expenses, ensuring they maintain their standard of living.

For a deeper understanding of life insurance and its benefits, we encourage you to explore our comprehensive guide.

Do I need life insurance?

Determining whether you need life insurance largely depends on your personal and financial circumstances. If you have people who depend on your income, life insurance becomes a critical consideration. Mortgage life cover can help clear a mortgage or other outstanding debts. It can also provide a lump sum or regular income to help your loved ones with the cost of day-to-day living.

The peace of mind that comes with life insurance is invaluable. Knowing that your dependents will be financially secure can alleviate much of the stress associated with the uncertainty of the future. Read more with our guide: Do I need life insurance?

When considering life insurance, reflect on the amount and duration of cover you need. These factors will influence the type of policy you select and the premiums you'll pay.

How does life insurance work?

Life insurance operates on the principle of risk transfer. In exchange for regular premium payments, the insurance company agrees to pay a lump sum to your beneficiaries upon your death. This agreement is particularly significant for individuals with mortgages, as it can prevent your heirs from inheriting your debts.

What types of life insurance are there?

There are two primary forms of life insurance: term life insurance and whole of life insurance.

Term life insurance policies:

Term life insurance, often referred to as family life insurance, provides cover for a specified period, with the benefit paid only if you die within that term. There are variations within term life insurance, including:

• Level payments. This straightforward and affordable option maintains a constant cover amount throughout the term.

• Decreasing payments. Ideal for those with diminishing debts, such as a mortgage, the cover amount reduces annually.

• Increasing payments. These policies see the cover amount rise over time to keep pace with inflation, ensuring your cover retains its value.

Whole of life insurance policies:

Whole of life insurance guarantees a payout regardless of when you pass away, provided you keep up with premium payments. These policies are more expensive and may result in a total premium cost that exceeds the payout.

How do I choose the best life insurance policy?

Selecting the right life insurance policy hinges on several factors, including:

• The cover amount you need

• Any existing cover you may have, such as death in service benefits from your employer

• The type of cover that suits your needs, whether it's level term, decreasing term, or whole-of-life cover

• Additional options like critical illness cover for further financial security

For those over 50, a specialised over 50s life insurance policy can offer guaranteed acceptance, despite the generally higher costs associated with age.

To find the best value policy, consider using MoneySuperMarket. We simplify the process by asking a few straightforward questions and then comparing quotes from our leading panel of insurance providers to give you guaranteed prices.

How do I decide how much life insurance cover I need?

The amount of life insurance cover you need is influenced by various factors, such as:

• Outstanding debts that need to be cleared

• Daily living costs and educational expenses for your dependents

• Funeral arrangements

What else should I look for in a life insurance policy?

When evaluating life insurance policies, ensure the policy fits your needs and be aware of any exclusions. For instance, undisclosed illnesses or dependencies may not be covered, and smokers often face higher premiums. Our guide to pre-existing conditions explains more.

More life insurance tips and tricks:

• Securing fixed premiums early on can help keep costs down, as premiums typically increase with age.

• A joint policy with your partner may be more cost-effective than two single policies, but remember that it only pays out once.

• Setting up the policy in trust can prevent the payout from being subject to inheritance tax.