Insurance is a vital safety net. You can’t drive without car insurance or have a mortgage without buildings insurance, nor would you want to, if only for the peace of mind. Mortgage holders also need life insurance to cover the cost of outstanding payments in the event of early death. However, there are many more reasons to buy life insurance and many varieties of policy available, which is why it’s important to compare life insurance products to find the right one.
How long does life insurance last?
The answer isn’t as obvious as it seems, as not all life insurance runs until the death of the policy holder. Life insurance can broadly be separated into two types: whole life insurance and term life insurance. Whole life insurance provides a lifelong policy, as long as the premiums – monthly payments – continue to be paid, resulting in a payout on the death of the policy holder. Term insurance describes policies which run for a fixed length of time. Examples of this kind of insurance include policies linked to a mortgage, those covering a parent until their children are no longer dependent on them, and insurance lasting until retirement when there is no further need to cover the loss of an income.
There are some restrictions on term life insurance:
- Policy holders must be within a given age range, varying between providers. For example, most companies cover adults under the age of 70 to 80 years old, so would be unlikely to sell a 20-year policy to anyone older than 50 to 60.
- You will not be sold a policy if you already suffer from a terminal illness.
- Only permanent residents of the UK and British citizens may take out UK policies.
- Policies tend to be sold in lengths of years that are multiples of five, up to as long as 30 years.
Term life insurance is cheaper than whole life insurance, making it an economic option for anyone not envisioning needing to provide for dependents beyond a certain point.
Short term life insurance is set up to last for 12 months or less. This type of cover can be useful for a variety of situations:
- To provide cover while arranging a more complicated whole life or longer term policy.
- Before travelling, particularly if the region or activity is high risk enough to be excluded from your existing policy.
- Upon taking out a loan, to ensure the outstanding repayments would be covered if you were to die before completion.
Short term policies can run for as little as a day and are relatively inexpensive and simple to set up.
Within each kind of life insurance, there is a huge variation in the finer details, which is why it’s crucial to compare life insurance policies. Provision can be made for many circumstances, such as frequent international travel, suffering from diabetes, sharing cover with a partner or being above a certain age, and much more. Death benefits vary widely and are linked to the cost of premiums; they can also be paid as a lump sum or in instalments to the next of kin or any nominated benefactor.
Life insurance serves a purpose and the exact purpose depends on your needs. By giving your insurance provider a complete picture of what coverage you want and for whom, they will be able to tailor the ideal package for your circumstances. Knowing that your death is provided for lets you get on with living your life.