How does life insurance work?
Life insurance works like this: you pay a monthly premium to your insurance provider so that when you pass away, your beneficiaries will receive a lump sum or regular payments. Life insurance is designed to assure your loved ones are provided for after you are gone. This significant sum can help cover outstanding bills and debts, funeral costs, sustain your beneficiaries throughout their lives, and offset the cost of an inheritance tax bill. With a variety of types of protection, you can choose one to suit your needs and concerns.
What are the types of life insurance?
There are three main types of life insurance.
- With level-term assurance, you receive the same level of cover for the entirety of your policy, which means your beneficiaries will know exactly how much they’ll receive in the event of your death.
- Decreasing term assurance, however, reduces cover over time. For this reason, most choose this alongside a repayment mortgage, as the amount of cover decreases in line with the amount you owe in mortgage repayments.
- Whole-of-life insurance offers protection right up until your death, which will mean steeper premiums. This type of protection, however, will be useful in covering the cost of a funeral and any unexpected costs.
How to know if you need life insurance
Assess the following factors when deciding if this type of insurance is best for you:
Dependants
Are there people in your life who depend on your income? This could be a spouse and/or your children. While you may have money saved and property to leave them, depending on outgoings such as mortgage repayments, bills and school fees, life insurance may be necessary if they are going to manage financially after you are gone. It is worth considering life insurance, too, if you are about to start a family. Your life insurance premiums will be cheaper now than when you are older. Even if you don’t have immediate family or dependents who rely on you, you may still want protection in the event of your death. A life insurance policy can be useful to have if you want to leave something to a friend or a charity.
Family income
If the breadwinner of the family passes on, the family will lose its primary income stream. However, it is important to consider if you take on other roles within the family, too.
For instance, if the parent primarily responsible for caring for the children dies, the widow will either have to step back from their job or spend more on childcare services. If both you and your partner earn incomes, work out if one income would still be enough to live on.To avoid being caught out, ensure you have considered all possible eventualities. Life insurance may be necessary protection if your loved ones are to cope financially.
Your job
Many employers offer a death-in-service benefit, which pays out a sum several times your salary if you die during your contract. This can be helpful but may not be sufficient to meet all of your outgoings. Life insurance is still worth buying now, even if you have this type of protection. Buying protection will get more and more expensive the older you get, and relying on your employer for this insurance may not be sound. (You may change your job, or your employer may go out of business.)
Do you believe you need life insurance?
The best way to determine if you need life insurance is to assess where you are in your life and whether your loved ones will need financial support in the event of your passing. We can help you decide whether you need life insurance and what type of protection you need. Contact Yes Mortgage Services to receive a free consultation.
At Yes Mortgage Services, we offer a comprehensive range of products from across the market.
Irrespective of whether you are looking to buy a new home, re-mortgage an existing property, or looking to protect your family from the unpredictability that life throws at it or protect your income if you are unable to work due to accident or ill health.
Yes Mortgage Services are committed to offering you the highest possible standards of service. We can undertake the whole process from answering the initial questions through to handling multiple product applications. Ensuring that everyone gets treated with the same urgency and maintaining your best interests are our main goals irrespective of the value of the mortgage.
We recognise that both we and our customers have everything to gain if we look after your best interests and treat you fairly in all aspect of our dealings with you.
