A life insurance guide for beginners
Life insurance is not just something for the rich or for the old. In fact, if you have dependents, whose life many be compromised if you die, you too should take out life insurance to offer them some financial security in the event of your death.
But the life insurance market can be a bit of minefield. It looks confusing, there have been scaremongering stories in the media about people robbed of their savings through high insurance payments then the insurers refusing the pay out and many people believe it to be expensive. So here we take life insurance back to the bare essentials and offer some advice to the beginner.
Broadly speaking there are two types of life insurance policy to choose from. You can choose between term cover and whole-of-life policies. So what’s the difference?
Whole of life is the most well known and possibly the simplest to understand. You pay money into an insurance policy every month and when you die, whenever that may be, your dependents will receive a lump payout dependent on the amount you contributed in life.
Term policies come in various guises, but the main difference is they provide life insurance cover for a specific, pre-specified time period. If you die outside of this period you get nothing.
There are three types of term insurance: level, decreasing and increasing.
Level term insurance is one of the most common. You pay a fixed monthly amount for a fixed time period and your family get the same lump payout if you die anytime in that period.
Decreasing term cover is becoming more popular. As the name suggests, the payout reduces over the term so is therefore used to coincide with a mortgage for example, that reduces over time as you pay it off. This is the cheapest type of insurance, but is best when linked to a loan or payment that also reduces in size over the same period. You can get specific mortgage protection insurance, which is essentially just decreasing term cover.
Increasing term cover is one of the more expensive types of policies. The cover increases throughout the term, hence the name.
You can also add critical illness cover. This will pay out either a fixed sum or will offer staged payouts if you are diagnosed with a critical illness listed on your policy.
Once you know the kind of policy you are after, you need to get further, in depth advice about what is covered and what isn’t and how much you are willing to pay each month in relation to how much you want to receive. Santander life insurance products are wide ranging so you can find one that suits your needs and budget.