Life insurance is often a neglected policy when compared to the likes of pet, mobile, car and home insurance.
This is partly because people believe that the cover provided through their employer is likely to be sufficient to cover their mortgage and also provide for their family in the event that they pass away.
This is often not the case at all, and you also need to consider what would happen if you were to leave your current employer and lose your employee benefits, such as death in service?
Many people also tend to believe that ‘it will never happen to me’ and don’t take out life insurance. We don’t tend to prioritise planning for the unexpected unfortunately but life can take unexpected turns, especially where our health is concerned. We can do our best to stay active, eat a healthy diet, and have no family history of illness, but things can still unexpectedly go wrong with our health. Passing away prematurely or becoming seriously ill is not something that anyone likes to think about, but the reality is that we need to do so.
Having the right cover in the right areas gives us peace of mind and will help ensure that should the worst case scenario happen to you, that your family will be financially secure in the event that you pass away.
There are a range of options to protect your family in the event of you passing away prematurely. Our mortgage and protection specialist at West End Mortgages can help you to prepare a comprehensive plan to ensure that you have done everything that you can to protect your family’s future, removing any financial worries from what would be a very difficult time.
The different types of life insurance are as follows:
Decreasing term assurance
The level of cover on a decreasing term assurance policy decreases over the term of the policy. These policies are typically taken out to cover a repayment mortgage or any other type of loan which decreases over time. This provides comfort in the event that you pass away, knowing that your mortgage can be paid off in full, alleviating the potential financial impact to your family during an already difficult time. The level of cover reduces over time, meaning that the cost of the premiums for this type of policy are generally low.
Level term assurance
Level term assurance pays out a set sum which does not reduce over the term of the policy. You can decide on the most suitable level of cover for you in addition to the length of the term. The policy could pay that sum out regardless of the remaining term of the policy.
This type of policy is typically taken out to cover an interest only mortgage or to leave a lump sum to your family in addition to your mortgage being paid off by a decreasing term assurance policy.
Due to the fact that the cover does not reduce on this type of policy, the premiums are more expensive than a decreasing term assurance policy.
Family income benefit
Family income benefit is a policy that it often completely overlooked by people, mainly because they are not aware that it exists. This policy is most suitable for people who have children or a financially dependent partner.
Unlike the lump sum life assurance policies already mentioned, this type of policy pays out a regular monthly tax free sum where you choose the level of cover and the duration of the policy.
Running a home and raising a family can be expensive, and this type of policy, in addition to cover for your mortgage can help to ensure that your family can continue to live in the same home and have the same lifestyle as they do now. We would normally look to set up the policy in line with your youngest child finishing further education or being financially self-sufficient. These lump sum policies make a huge difference to assisting with your outgoings after the mortgage has been paid off. Regular outgoing such as council tax, utilities, food, insurance, car payments, nursery costs etc will remain.
Our mortgage and protection specialist at West End Mortgages can help you to establish the most suitable level of cover for your circumstances, in addition to the length of the policy term.