Why We Need To Consider All Our Options When Buying Life Insurance

Life insurance is something we all tend to require need however even though we pay out for it month on month not ever really considering whether the plan is right for our circumstance. Few people when looking for life insurance recognise the many variations which cater to different needs. I hope to provide a high level overview of each so for those who want further information you have a good basic foundation on which to build.

There are four main different types of life insurance, two of which come under the same banner. We have a term assurance policy which can either have a level sum or decreasing sum assured. There is an alternative in a family income benefit policy, which pays out a monthly benefit rather than a lump sum. Finally we have a whole of life insurance plan which unlike the other types is not constrained by a time period.

So why do we need life insurance anyway? There are many reasons why one would choose to buy life insurance, we almost all need to consider it when we buy a house, some consider it when bringing a new life into the world while others just want to ensure their loved ones are financially protected should the worst happen.

Let us start with term insurance, the simplest of the products. Term assurance is designed to protect a specific sum for a set time period providing a cash lump sum should the worst happen. Term assurance can either be purchased with a level of cover that remains fixed or declines over time. Level term insurance is most often used for an interest only mortgage or other fixed outgoing which protects you for a set time period. A decreasing term assurance policy differs in the sum assured, the level of cover declines over the term of the policy to zero and is often used for a repayment mortgage. Due to the simplicity of the product and the competiveness of the industry term assurance is relatively inexpensive for the level of cover.

An alternative to a lump sum product is family income benefit, it also financially protects you for a set time period however instead of providing a lump sum benefit it provides a monthly benefit. This has proved particular popular during difficult times due to the stability the product offers, there is no need to invest a lump sum should the worst happen, you are simply presented with a guaranteed um each and every month to the end of the term. Family income benefit also tends to be one of the cheaper products due to its design.

The final option and often used to guarantee a lump sum for your loved ones is a whole of life insurance policy, whole of life does what it says, it is a policy which as long as you maintain your monthly premiums will cover you for the whole of your life and pay out a lump sum on death. Whole of life policy is often used for inheritance tax planning and with many you have an option to link the sum assured to a level of investment although this does increase the risk taken as we all know investments can go down as well as up.

The four main life insurance products are designed for different purposes and it is important to recognise which policy best fits your needs. If you are still unsure of which product best fits your needs or want more information there are a vast number of resources on the internet to help you find your way. Just remember like with any insurance product it is important to shop around for the best deal, some insurers may well look at you in a favourable light given your demographic and offer you cheaper rates.