George Banco Rough Guide To Life Insurance
Next in our four part series on insurance we have life insurance, a policy which is a little less known and a lot less commonly taken out, but no less important.
Life insurance provides the safeguard for those who matter to you the most in the sad event you leave them behind. Though it’s a mystery where we go after death, it’s always comforting knowing wherever we go family members won’t be left high and dry if they depend on us.
There are a lot of different permutations and factors being accounted for when it comes to a life insurance policy being made, so let’s explore some of these and try to make sense of it all.
Types Of Life Insurance
There are two main types of life insurance to consider –
Term Life Insurance
These policies run for a fixed period of time such as 5, 10 or 25 years. In this type of policy the insurer will only pay out if the person who is covered passes away within the policy period. There isn’t any kind of payback when the policy ends.
Whole Of Life Policies
Pretty self-explanatory, these policies will pay out no matter when the person dies, as long as premium payments are still paid.
Exceptions To Cover
Life insurance typically pays out on the event of death of the person covered, but there are a list of exceptions which may hinder pay out. These include:
- Drug and alcohol abuse
- Dangerous sports (you will need to pay extra for this to get covered)
- If a policy is taken out on someone with a serious illness a policy might exclude death from that illness. Separate long term illness cover and critical illness cover exist for this.
Is Life Insurance Necessary?
Typically a choice to take out a life insurance policy is done when one member of the family contributes all or most to repayment of a mortgage or to the family’s income. More often than not they are taken out on the primary earner of the family who the rest of the family are dependent on.
This is usually because the state often doesn’t pay enough to widows and their children to accommodate their needs – so life insurance is critical for those who wish to leave something to provide for their family after they die, especially if they don’t have huge amassed savings or assets.
There are other types of insurance that might help if death isn’t looming for the family’s primary earner – such as income protection insurance and payment protection insurance for those unable to work if ill. Typically life insurance is for a worst-case scenario.