Life Insurance

What is Life Insurance?

Life insurance is a policy that pays out a lump sum in the event that one of the people named on the policy passes away. 

It is often described as one of the most selfless things you will ever buy – as you won’t be around to receive the money. The aim is to protect your loved ones, making sure they are well looked after should the unexpected happen. 

Many people take out life insurance when they buy a house, to make sure that those they leave behind can afford to keep up with mortgage repayments. That way, there is little risk that they will lose their home.  

Life insurance policies will often pay out if you are diagnosed with a terminal illness. 

What types of life insurance cover are there?

There are various different types of life cover, which is why it’s important to talk to a financial advisor. We will be able to help you identify the type of policy that will meet your needs and your budget. 

The first thing to consider is the length of your life insurance policy. You can choose from a ‘term’ policy, which lasts for a set number of years, or ‘whole of life’ cover which lasts for the rest of your life. 

How does term life insurance work?

Term life cover lasts for a set term, usually between 10 and 30 years. This is the more common form of policy chosen by many people to last throughout the term of their repayment mortgage.

In choosing term life insurance, you will need to think about how long you need the cover to last. By the time your mortgage is paid off and your children have left home, you may not need a lump sum to protect you should one of you pass away. 

Why choose whole of life insurance?

People buy whole of life insurance to make sure that their beneficiaries receive a sum in the event of their death at any age. 

These policies are more expensive as the insurer will inevitably have to pay out at some point. Some whole of life cover is linked to an investment plan, so that the money you pay for the policy will potentially grow over time. The cost of the policy is determined by the size of the payout you want your family to receive.

What are the different types of term life insurance?

There are further types of term life cover to consider:

Level term assurance plan: This is the most common form of life insurance, where the payout if you die is an agreed lump sum. You will pay monthly premiums throughout the term of the insurance policy.

Decreasing term assurance plan: With this form of cover, the value of the payout decreases steadily during the term. It is usually used to cover your mortgage, with the lump sum reducing alongside your mortgage debt.

Family income benefit plan: This type of policy is designed to provide your family with an income for a set period after your death – anything from 12 months to years. Many people feel that monthly payments would be easier to manage at a difficult time than a single large sum.

Relevant life cover: This is a form of life insurance designed for the directors of small businesses. It can be paid for through the business, which is a very tax efficient option. If you run your own company, it is well worth exploring this option to save money.   

Why is it important to have life insurance?

Life insurance could be the most important financial product you ever buy. While most people will never need their policy, none of us can predict the future. 

A life insurance policy is designed to give you the peace of mind that your family will have financial support if you are no longer around. We protect our belongings, our phones and our cars… protecting our families is the most crucial of all.

How can CTA Mortgage Advice Centre help?

We are qualified advisors in financial protection. When you take out this kind of policy, you want to be sure that your life insurance pays out if you die. We will explore life insurance quotes to get you a comprehensive policy that suits your needs, at a good price. We will ensure you understand all the terms and conditions, that you are clear about any medical requirements or exclusions, and also discuss any implications around inheritance tax.

A consultation is without obligation, so get in touch for an initial chat. Mortgage Advice Centre is a trading name of Carter Thompson & Associates which is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited, which is authorised and regulated by the Financial Conduct Authority.