A life insurance policy pays out either a lump sum or a series of payments to your estate
if you die while covered by the policy. These payments are normally tax-free.
Most people have life insurance in order to:
- Pay off an outstanding mortgage if the policyholder were to die. This type of insurance
is specifically known as Mortgage Protection Insurance.
- Provide money to pay off other debts. This is known as Term Insurance. Term insurance
is usually taken out over 15 to 25 years.
- Provide a lump sum nest egg for the next of kin - usually dependents such as the wife
and/or children). This is also known as Term Insurance.
- Provide an income, as opposed to a lump sum, for your dependents, in the event of your
death. This is known as Family Income Insurance, and the family will receive an income
for the remaining period of the policy's term.
Most people choose to pay their life insurance on a monthly basis, although, if you prefer,
you can pay premiums annually in advance. The premiums for life insurance vary in relation
to how long you want the policy for and your personal circumstances - i.e. your age and
medical history.
life insurance can be combined with other forms of insurance, such as Critical Illness
(also known as Serious Illness Insurance) in order to be fully covered for any eventuality.
You can arrange critical illness insurance separately, however it often works out cheaper
to combine both forms of insurance into one policy.
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