Advice about life insurance
Life insurance provides financial protection for your loved ones in the event you die. It can also provide financial protection in the case of the death of another person, if they are financially dependent on you. A life insurance advisor can help you select the best products to suit your needs. This will ensure that you are protected at the right level of risk, and you don’t waste time on policies that aren’t suitable.
This section will help you learn about the different types of life insurance and the reasons why you might need it. It also explains how to select the best life insurance products.
What is life insurance?
A life insurance policy pays a lump sum upon the insured’s death. Insurance policies may not pay out if the death occurs before a certain age. However, you can get insurance that pays out at any time (whole-of life policy).
What is life insurance?
A financial advisor may recommend life insurance if your family is likely to be financially challenged in the event you die. If you are financially dependent on a family member (e.g., your spouse), the same rule applies. You can learn more about the amount of life insurance that you need by clicking here.
Is it mandatory to have life insurance when you get a mortgage?
The lender can recover the mortgage from the property’s sale, so life insurance is not required. If you live with a spouse or dependent, you do not want them to lose their home due to the forced sale of the house. If you have children, you might consider buying life insurance when you apply for a mortgage.
A joint-life policy will guarantee that your mortgage is paid off in the event of your death.
What are the various types of life insurance?
There are many types of life insurance. Here’s a list of all the major policies, which is quite a lengthy list if you are wondering what type of life insurance you need.
Term
A term policy will cover you for a specific period. It won’t pay out if your death occurs before that time. You may wish the coverage to continue until you are no longer working. You can also keep the cover until your children are older, which will make them less dependent on you.
Increasing term
The name implies that increasing term life insurance pays more and the premiums increase with age. It is designed to grow in line with inflation so that the amount you wish to leave your loved ones retains its real value.
Decreasing term
The opposite is true – your payouts shrink the older you become. These policies often have a connection to large loans like mortgages. As the amount of outstanding debt decreases, the sum will decrease.
Level term
Your premiums will remain the same for your entire policy with level term insurance. The payout is the same regardless of whether you die after 5 years or 30 years.
Whole-of-life
Whole-of-life policies will pay out on your death, no matter when it may be. This means that you will receive a definite payout at some point. Premiums for whole-of-life policies will be higher than those for term life policies, and you will have to continue paying them until your death. If you live long enough, you may pay more premiums than you would on your death. A whole-of-life insurance policy can be used to pay an inheritance tax bill.
Joint coverage
A joint life insurance policy covers you and your spouse. This policy pays once and is used to protect the mortgage surviving spouse from being left with the full mortgage. It can also be used to protect business partners or the business. It can sometimes be cheaper than buying two separate policies.
You have the option of a payout on the first or second death. The payout on the second death is often requested by those who choose the latter, as they want it to go to their beneficiaries or children.
More than 50
The Over 50s Cover, also known as funeral plans, allows you to leave a legacy to your loved ones by leaving a gift. These plans are used to help you plan for your funeral. When you are over 50, you can get a plan and still pay monthly premiums. The plan you choose and how many premiums you have paid will determine the amount you get.
Critical illness
You can rest assured that your finances will be taken care of in the event you are seriously ill or injured. In these cases, the insurance company will usually pay a lump sum that is tax-free. This money can be used to pay down a mortgage or to replace income lost. You should carefully read the policy text as only certain illnesses and injuries are covered.
End-of-life illness
The terminal illness coverage is different from the critical illness coverage. If you are diagnosed with terminal illness, you can receive your life insurance benefits. This is often added to life insurance policies like whole-of–life.
Parental leave is free
These policies are offered by a few insurance companies and they pay your children free of charge. However, they usually only last one year and have a PS15,000 payout. As an immediate protection measure, you can take out a policy to protect each child (typically for children under 4), while you think about your long-term life insurance plans.
Life insurance can be used to pay an inheritance tax bill
To cover inheritance tax (IHT), you can use a whole of life insurance policy. IHT can be a problem because it must be paid before money is released from the estate. This could mean that your beneficiaries might not have enough money.
Some people use life insurance policies to pay the IHT bill. The policy must be paid into a trust outside of your estate so that it is not subject to IHT. The policy that does not pay into trusts will subject to IHT.
Trusts are a highly specialized area. Before you set them up, consult a financial advisor and a solicitor. Learn more about trusts, estate planning.
How to get life insurance
It is easy to get a policy for life insurance. As with car insurance, you can also compare policies online and get one online. You can usually modify or cancel your policy and switch to another provider if you need to.
Be aware that cancellation fees (also known as surrender values) may apply. You will need to consider your financial situation and your family’s. Before you sign up for a policy, it is worth speaking with a financial advisor to ensure that it is well-suited to your financial needs.
Can I purchase life insurance for my family member?
Life insurance can be purchased that covers another person (e.g. a parent) if the individual isn’t confident in doing so. To be covered in this way, however, you will need to have the person’s written consent.
Also, you must be able show an ‘insurable concern’ for that person. You must show that their death will have a negative effect on your finances. You won’t be eligible for life insurance if you don’t rely on the person in question for your financial security. This is so that no one can benefit financially from the death of another person.
You can insure your spouse or parent/relative who supports you financially. However, it is unlikely that you will be able insure your children (unless your dependents, e.g., earn an income). You should not act.
Can an employee purchase life insurance?
You know that certain staff members are crucial to the success of your business and can be difficult to replace. These people are called ‘key personnel’. These key people are often covered by special life insurance. Learn more about key person insurance.
What is the cost of life insurance?
Life insurance costs vary depending on your age, health and lifestyle factors (such as smoking status). You will see a wide range of providers and the amount of coverage you choose.
It is possible to estimate the cost of your monthly premium. If you’re a 30-year-old non-smoker and want a term life policy that lasts 30 years, with PS100,000.00 if you die during that period, your monthly premium will be around PS6. Because the mortgage balance would decrease over time, mortgage life insurance would be less expensive.
Life insurance can be more expensive if you smoke or engage in other lifestyle habits like smoking. Monthly premiums for smokers will be twice as high starting at age 40.
Additional Resource:
https://tpllife.com/
https://extension.missouri.edu/publications/gh3422
https://www.maxlifeinsurance.com/