What is Life Insurance?
Life insurance is a policy that is taken out against your life, so if you were to die, it would minimise the financial impact that your death could have on your loved ones. If you die or you are diagnosed with a terminal illness (with a life expectancy of 12 months or less) it will pay out a cash sum.
The lump sum could be used for many reasons, for example to pay off an outstanding mortgage or loans, or to provide an income for a surviving partner or spouse. Life insurance products can be complex and choosing the right type to cover exactly what you want covered can be difficult. This is why it is so important to seek advice from one of our advisers who have the ability to understand what life insurance you need, depending on your financial circumstances and budget.
Do I need Life Insurance?
Not everyone does, but if your partner, children, or your relatives depend on your income to cover the mortgage or other living expenses then the answer would be ‘yes’. By taking out a life insurance policy you would have the peace of mind in knowing that if you died, you would still be able to provide for your family. Again, our advisers can help you identify if this is appropriate for you, how much you would need and which type of cover.
You may also want to consider a life insurance product that can help cover the costs of bringing up children or looking after other dependants by providing a regular income. This can be provided through a policy called ‘Family Income Benefit.
Family Income Benefit
Family Income Benefit usually insures you upon death (but can also include critical illness cover) and will pay a regular income to your household either monthly or annually for the duration of the policy. The amount of cover it provides will usually match the life assured’s salary or match your monthly expenditure so that your family are able to maintain their standard of living long after you pass away. Family Income Benefit can be used to provide the surviving spouse with an income to raise children with a good standard of living until they are at an age when they are likely to be financially independent. The regular income could also be used to provide for aged relatives that you care for or dependants with serious health conditions that require long-term care throughout their life. The benefit is a tax-free payment and can be linked to inflation, so the buying power of your policy does not erode over time. As the term of the cover is usually shorter for this type of life insurance, this is often an affordable way of protecting your loved ones within your budget.