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Life Insurance
Life insurance is a life protection contract between a policyholder and insurer that pays out a lump sum after the policyholder dies. Under a term life insurance, the death of the policyholder must be within the policy term. If the term expires and the policyholder is still living, there is no payout. A whole life insurance guarantees a pay out of a lump sum since there is no term stipulated on the contract, except for the death of a policyholder, or a diagnosis of a critical illness if a life insurance with a critical illness cover was purchased..
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How much cover do you need?
Online life insurance specialist godirect.co.uk advises that there are many factors that a policyholder must bear in mind before buying a life insurance. It is advisable to compare quotes of various insurers.
Big Pay Out, Higher Premiums
If you are considering buying a life insurance cover, mull over the amount you want to leave your family, and the amount that would take care of outstanding debts. If your employment package has Death in Service scheme, reduce the total amount you want insured. Include a non-working spouse in the life cover, especially if your family is young, because there might be a possibility that if that spouse dies, you, the primary earner, might stop working to care for the children. Insurers suggest an amount ten times the income of the primary earner.
Separate or Joint Policies
Life insurance consultants note that it is cheaper for couples to buy stand-alone life protection policies, except when the conditions of a joint policy is appropriate. It is more practical for couples to buy a joint policy that pays out on the first death than the one that pays out when both spouses are dead.
Money can not buy your happiness
Less Risk, Lower Premiums
Premiums may be higher for those who are older, have health issues, are smokers, have a hazardous job. Heavy drinkers, the obese, and extreme sports enthusiasts are shunned by insurers, or charged expensive life protection premiums.
Insurers warn that applicants must disclosure everything to avoid the non-payment of life benefits. Insurers can claim the argument of non-disclosure as a defence.
Shorter Term, Cheaper Policy
Set a period of policy cover, such as the pensionable age of a spouse or the age wherein a child should graduate from college.
Life Insurance versus Death in Service
Life insurance can be adjusted according to the needs of a policyholder, while the Death in Service scheme has built on a framework and doesn’t conform to every employee’s needs.
Life insurance applicants can select the type of coverage, various alternatives to combine with the life insurance plan, and the amount you want to insure. Life insurance benefits are paid out if the policyholder is diagnosed with a critical illness, that is, if you have chosen a critical illness cover, and if the policyholder dies. Life insurance coverage will still be applicable even if a policyholder changes jobs or retires, or even moves to another country. A policyholder can choose a monthly or annual payment of premiums. Discounts are offered by insurers when a policyholder pays premiums per year. You can leave the policy benefits to whomever you choose, even to your cat. The policyholder can alter the policy coverage according to his family’s needs and can select an option of mortgage loan payment to protect your family from financial hardship once you, the primary earner, pass on.
Some companies offer employment packages with death in service schemes, which pays out a lump sum to dependants of employees who dies while employed with the company. However, you will lose the privilege if you leave the company through retirement, resignation, or termination. The Death in Service payout may be three or four times the amount of an employee’s annual salary. Although free of charge, Death in Service schemes don’t give security to the employee’s dependants, since the pay out is arranged under a discretionary trust, which allows the trustee to discern how much the beneficiaries will get. Death in Service does not allow mortgage coverage.