Beginner’s guide to life insurance
Starting the search for life insurance can be daunting. There are a lot of policies out there and it can be difficult to determine which one will suit you and your family best. Perhaps the most useful single thing to do is to consider what you need from the insurance. Families often use life insurance to help pay off a mortgage, bills or tuition fees. Sometimes it just contributes towards staying financially comfortable and not having to worry about money during a stressful time.
How much does it cost?
That depends on your policy. Cost is also affected by personal factors, like how old you are and whether you have, or have had, any relevant medical conditions. With all policies you must ensure that you have met all the terms and conditions in order to receive the final cash sum.
The cost of level term policies is determined by how much you want your family to receive – and depends on how much you are willing to pay per month. The more you pay per month, the more money your family will get (as a rule.)
You may be able to lower the cost of your premiums by purchasing decreasing term cover. The cost of these policies is usually comparatively low because the amount paid out in the end gradually decreases as your policy continues. The logic behind this lies with only paying for what you perceive your family will need in the future.
For example, if you want your family to get a payout to help with the mortgage, the amount they will actually need decreases as time goes on. This is because you will be contributing towards your mortgage every month, reducing the amount you owe.
Some people with children can also see decreasing term policies as useful – as the children get older they will (hopefully) become more financially independent, and therefore need less from the final payout.
How long does it last?
If you purchase whole-of-life insurance you will be covered by your policy until you die. This kind of cover is usually quite expensive because it is guaranteed to pay out as long as all the terms of the policy are met.
Insurance can also be bought in blocks: for example, you could buy insurance to cover you for fifteen years. This means you only pay for as much as you need. If you find you still want cover after your policy has expired, you can invest in a new policy.
If you are unsure about any aspect of life insurance it may be advisable to consult an expert. They may be able to help you work out the details.
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