Life Insurance – when you are gone

Immortality is no big deal. Just imagine getting up on a Monday morning 52 times a year for the rest of eternity. Really only two advantages of eternal life spring to mind – you could start reading ‘War & Peace’ and know that you would have time to finish it, and you wouldn’t need life insurance. However, as mere mortals, maybe we shouldn’t start on a very long book and we should take out life insurance, because we none of us know just how long we have got.

Not particularly cheerful advice, but very practical. Can you really face the idea of departing this life and leaving behind little more than the memory of you? If you have family or other dependants, it is vital that you provide for their futures especially if you are the main breadwinner. The trauma of the loss would be quite enough for anyone to cope with, without having to worry about how they are going to manage financially, and maybe even contemplate the loss of their home.

So if you haven’t got adequate life cover or perhaps have no life insurance of any sort, you should take action to correct that situation without delay. Perhaps you have considered it and perhaps you have even had a look at what is available, and then put off doing anything about it because there are too many options and it is difficult to know which to opt for. This is absolutely understandable because there are so many variations that anyone could be forgiven for being confused – but procrastination will not put food on the table for your dependents when you are gone.

So you need information. The following is a general guide to what is available, which should enable you to decide more or less which types of cover may be best suited to your needs. The fine detail is avoided because that is best left to the experts, whom you should be able to approach with a rough idea of what you are looking for, and equally important, which types would not be suited to your needs.

Term insurance in one of its forms is likely to meet most needs. Its name indicates that it provides cover for a period which is agreed between the company providing the policy and the insured individual. At the end of that term all cover ceases and there is no cash value remaining. Payment against the policy will usually be in the form of a lump sum on the death of the insured.

There are a variety of different forms of cover available under the umbrella name of term insurance, of which the following are the more usual examples.

Family Income Benefit is one of the best and must have been developed with bereaved families in mind. The death of the policy holder during the term of the insurance releases a tax free sum which will be paid every year right through to the end of the term. Costs for this type are at a minimum because the term during which the payments would be made is constantly reducing. Level term insurance is very straight forward. It is well suited to covering the capital portion of an ‘interest only’ mortgage, because the value of cover is determined at the outset and is retained for the whole of the term.

A Decreasing Term policy on the other hand is better suited to covering a repayment mortgage, as it decreases in value over the term to nil at the end, effectively shadowing the reducing balance of the mortgage. The premiums are correspondingly low.

An Increasing Term mortgage maintains its value throughout the term by taking the effects of inflation into account, and is best suited to fulfilling a lump sum requirement at a constant value. The premiums are correspondingly high.

Finally it is worthwhile mentioning Whole of Life cover which is not actually term insurance, as the cover provided is effective to the end of the life of the insured person, subject only to the premiums being paid as due. The insured amount, plus the value of any benefits accruing to the investment, is paid out on the death of the insuredThe above few examples give a generalised guide to some of the policies which are available, and should allow you to talk to a broker and discuss your needs in detail. It may well be that more than one type of cover will be required to meet all your needs, but find a brokers via the internet (which is an excellent source), and they will provide guidance.

Once settled you can relax, content that you have taken care of your dependents needs, and if you are really adventurous you could start reading ‘War and Peace’!