Life cover, which can also be known as life insurance, is a type of policy that protects your loved ones financially if you die. It can help minimize the financial impact that your death could have on your family, and offer peace of mind to those that you care about most.
Most life cover policies will pay out a cash sum if you die whilst covered by the policy. It can help them worry about everyday money worries, such as household bills, childcare costs and mortgage payments.
The two main types of life cover are term life insurance and whole of life insurance:
· Term life insurance: the life insurance policy covers you for a set term and could pay out a cash sum if you die within that period of cover.
· Whole of life: the cover lasts for the whole of your life, so the cash sum will be paid whenever you pass away, rather than during a specific period of cover.
Do you need Life Cover?
The answer to this really depends on your individual circumstances. That being said though, if there are people that depend on you financially, such as children or a partner, then life cover could be a way of helping to protect them.
Ultimately, the question you should ask yourself is: would your family be able to manage if you were no longer around? How much money would they need to cover childcare costs, household bills and day-to-day living expenses?
What are the main types of Term Life Insurance?
· Level Term Cover – level term insurance pays out a set lump sum, that does not change throughout the period of cover.
· Decreasing Term Cover – decreasing term insurance is often used to help capital repayment mortgages because the amount of life cover reduced roughly in line with the way the amount you owe your mortgage lender reduces over time.
What is Critical Illness Cover?
Critical Illness Cover can help minimise the financial impact on you and your family if you were to become critically ill. It’s an option that can be added for an extra cost when you take out Life Cover, or can be taken out on its own.
Critical Illness Cover can pay out a cash sum if you’re diagnosed with, or undergo a medical procedure for, one of the specified critical illnesses covered by the policy.
Who needs Critical Illness Cover?
A critical illness can affect anyone at any age and can turn your life upside down in a very quick time period. In the event of being unable to work due to a critical illness, having a back-up plan in place can alleviate some of the financial stress of the situation. This will allow you to focus your energies on the most important thing, getting better.