When is the Best Time to Buy Life Insurance?

It is human nature to have the attitude that "it will never happen to me", but as most of us know, sometimes it does, and when it does, it's better to be prepared; not doing this could mean your final demise could have devastating consequences for those loved ones left behind. No matter how unpleasant it may be to contemplate, arranging your Life Insurance policy could end up being the best decision you've ever made.

        

How do I know I need it?

A general guide used by the industry to determine whether Life Insurance is necessary, all those who have dependents such as a partner or children are deemed to be good candidates for Life Insurance products. This ensures when the worst occurs, you will have the security of knowing that your family are looked after and able to take care of any financial obligations after you've gone.

As a rule, Life Insurance is not considered necessary if you do not have dependents, however, it can be a useful security measure if you have a joint financial commitment such as a loan or mortgage, additionally many business partners also find Life Insurance provides peace of mind. Another factor to consider is that it may work out less expensive to take out a policy now whilst you are in full health, as rates tend to go up with age as the likelihood of health problems increase; think of it as a pre-emptive strike.

When should I take out a policy?

If you are currently without Life Insurance and are wondering when the right time to take out a policy is, there are some changes in life circumstances, which may prompt you to take the plunge. These include, becoming a parent, getting married, buying a house, setting up a business and a change in employment or income level.

What can it are used to pay off?

In most circumstance a Life Insurance policy will be given to the beneficiary of the policy as a lump sum, in the event of your death, however it can also be arranged to be paid as smaller installments over a pre-determined length of time. For most people this lump sum will be used to settle any debts, in most instances this will be a mortgage or loan; however the money can be used for almost anything you choose, such as;replacing your salary, providing childcare for your dependents, covering educational costs for any older children that might be in further education.It can even provide cover for the smaller, day-to-day things such as the cost of utility bills, medical care or even just the food shop.

Are there different types of Life Insurance?

The answer to this is yes! There are two main types of Life Insurance available: Whole of Life and Term Assurance. Whole of Life policies are pretty self explanatory and offer cover that extends over the entirety of your lifespan, advantages of this type of policy include, considerably higher pay outs, disadvantages include, substantially more expensive premiums.

On the other hand with Term Assurance Life Insurance as you are only covered for a fixed term, for example 20 years, this option tends to attract those looking to pay lower premiums over a shorter period of time. The intended purpose of this type of Life Insurance is that you have a policy with a duration long enough to cover either the length of your mortgage or provide financial care for your dependents, such as a partner or children, until such a time they could be financially independent. However it is important to remember that should you perish after the fix term of your policy has ended, there will be no financial yield.

Term Assurance policies are then split into a further two options: Level and decreasing term. Level term assurance policies will pay out a fixed lump sum at any point during the duration of the policy this option is often taken out by those with interest only mortgages. Decreasing term assurance policies differ in the fact that although they also pay out a lump sum, the amount your beneficiary may receive would decrease each year the policy went on, eventually reaching zero at the termination date of the policy. This type of Life Insurance policy is commonly taken out by those with a repayment mortgage, as the amount needed to pay off the mortgage would decrease each year you make payments, meaning you will require less money as the years go on to obtain financially security.

If you currently have or are thinking of taking out a joint mortgage, taking out one of the afore mentioned policies would be a wise decision. Without Life Insuranceif one of you were to die then it could leave the surviving partner unable to meet the repayments and subsequently the home may be lost.

How much cover do you need?

The perfect amount of cover should enable your dependents to maintain the lifestyle they have even after you have gone. After that everything else pretty much depends on your commitments in regards to the size of your mortgage, your current income, any financial obligations, such as debts and the number of people who are dependent upon you. A good way to estimate the size of the payout you would need is to times your current income by 10, however for those without children under the age of 18 this much cover may not be necessary.

As with any financial product, the easiest way to secure the best deal is to shop around, the same can be said for Life Insurance, the best way to ensure you obtain the right cover for your circumstances and that will pay out the required amount to your loved ones in the case of your death is to compare the choices available. The best way to do this is to use an online comparison site.

Death in service

Before taking out Life Insurance it would be wise to check your employer does not offer a death in service package, some companies offer their employees a 'death in service' option. This frequently involves a payout of roughly 4 times your annual salary in the event of your death whilst you are employed by that business. If this provides you with adequate cover, there would be no need to waste expense on purchasing unnecessary cover. However, if you change your occupation or are employed somewhere this service is not offer Life Insurance is your best way to provide security for your family once you are gone.

        


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