Life insurance is a type of insurance contract which pays out a lump sum to your dependants should you pass away during the term of the contract. The cost of a policy is determined by a number of factors including your age, health and lifestyle.
How Life Insurance works
A typical life insurance policy – called term insurance – will pay your dependants a set amount of money as a lump sum if you pass away within a specified period.
The amount paid out is called the ‘sum insured’ and the length of the policy is called the ‘term’. You choose the payout amount and the length of the term.
The sum insured should typically be enough to cover the money you have left on your mortgage, any other debts you have and some extra to help make your family’s life easier when you’re gone. The term should be at least as long as your mortgage.
Level term life insurance policies pay out the same amount of money no matter when you pass away during the policy. But with decreasing term life insurance policies the payout will be less if you pass away towards the end of the policy, which may match your decreasing outstanding mortgage.
You will need to keep up with your monthly life insurance payments to make sure you’re covered.
Why do you need life insurance?
Life insurance can help your partner or children continue to pay for any financial commitments you have that might then fall to them to pay if you were no longer here.
Life insurance can help to make sure your dependants would then be able to keep up with any mortgage repayments and bills you pay if you passed away. The lump sum payout they would receive could also help to pay for other things you would usually help to cover, like food bills and schooling.
How much does life insurance cost?
Life insurance is surprisingly cheaper than you would expect and it’ll give you peace of mind knowing that you’ve protected the ones you love.
The cost of life insurance is determined by a variety of factors and so there isn’t an average cost to get covered.
The five key factors that can impact the cost of life insurance are:
- How much cover you require
- If you need a level term or decreasing policy
- The length of the policy
- Your age
- Your health and lifestyle
Learn more about Life Insurance
Our website offers information about investing and saving, but not personal advice. If you’re not sure which investments are right for you, please request advice, for example from our financial advisers. If you decide to invest, remember that investments can go up and down in value, so you could get back less than you put in.