The Low-down on Life Insurance
Because of the current financial crisis in the UK, millions of people are starting to look at life insurance as a luxury rather than a necessity. This is fine for those who have no outstanding debts, such as a mortgage or a secured loan, and no dependent family members. For those individuals that do have these responsibilities though life insurance is a must…as you never know when the worst may happen.

Types of Life Insurance
There are basically two main types of life insurance policy:

• Whole of Life insurance
• Term insurance

Whole of life insurance is a traditional type of policy that pays out an agreed amount of money in the event of your death. You are required to pay a set premium each month for the duration of your life and if you stop paying the premiums then the policy lapses and you are no longer insured. Some insurance companies state that should you cancel the policy at any time then you get nothing back and this is one of the main clauses to look out for when searching for a provider.

Term insurance on the other hand is a short-term policy that covers a specific period of your life. Most people take out term life insurance in conjunction with their mortgage so that should they die during the terms of the mortgage the outstanding amount is paid off by the insurance policy. The policy ends and the cover stops once the policy has run for the specified number of years, which is the same as the number years your mortgage runs. This type of life insurance is ideal for individuals taking out a mortgage or secured loan as it guarantees your debts are paid off in the event of your death.

Choosing Life Insurance
There are numerous factors to consider when choosing life insurance, the top five of which follow:

• Whole of life or term insurance? You need to decide what you want your life insurance for i.e. to pay off debts in the event of your death or as a cash windfall for your loved ones. Younger people are normally better off with term insurance however the older generations (who don’t have outstanding debts) tend to choose whole of life policies.
  
  
• Do you get a percentage back if you cancel the insurance policy? Some companies provide policies that do offer a form of rebate if you end the cover. Most don’t though and so you stand to loose everything you put into the policy if you fail to make the monthly payments.
  
  
• How are the life insurance benefits paid? You can often choose between receiving the payout as a lump sum or as a regular income. With term life insurance you will probably need a lump sum to pay outstanding debts however whole of life policies are often better paid as a regular income.
  
  
• Is critical illness cover included? Critical illness cover is an added extra on most life insurance policies and covers you for most of the major illnesses e.g. cancer, heart attack, stroke etc. This means that the insurance policy will pay out a specified amount in the event that you are diagnosed with one of the listed illnesses and you aren’t left wondering where your mortgage payments are going to come from.
  
  
• Are the premiums affordable? You may be able to comfortably afford the insurance premiums now however will you still be able to cover them if your financial circumstances change? Make sure you only take out as much life insurance cover as you need.
  
  

The Pros and Cons of Life Insurance

The advantages of having life insurance are obvious i.e. with term insurance you have peace of mind knowing your mortgage/secured loans will be settled should you die and with whole of life insurance you know your loved ones will be financially secure. Once the policy has been set up and put in place you just make your monthly payment and look to the future.

The disadvantages however include the fact that the insurance premiums are another payment you have to make each month, when things may already be a bit tight financially. Then there’s the fact that if you fail to keep up the payments your policy lapses and you can lose everything you already have paid.

Life insurance is a must for some individuals but not for others and so it is often worth seeking advice from an independent financial advisor before choosing a policy. At least then you know you have the right one for your needs.