One of the most popular questions that insurance agents and insurance companies are asked is, “How much does £100,000 of life insurance cost?”
While it is important to compare insurance quotes to determine the answer, it is also important to consider additional factors when choosing how much life insurance is right for you and your family.
How much coverage you have is just as important as the company you are working with – here will we discuss what you should know about choosing a policy.
Life Insurance Reviewed
Before explaining the cost of life insurance, it is important to take a step back and review what life insurance is. A life insurance policy is an exchange that policyholders complete with insurance companies – in exchange for a monthly premium payment by the policyholder, the insurance company agrees to pay out a certain amount of money if and when the policyholder passes away.
These funds can then be used by the policy’s beneficiaries to pay final expenses, handle debts, and cover costs.
Different Types of Life Insurance
There are a number of different types of life insurance policies that cover a number of different areas and can be acquired at varying monthly premiums.
Before deciding that £100,000 of life insurance is what you want and or need, it is important to review and understand all the options available.
Level Term Assurance
Level Term Assurance is when a person pays a set premium, usually guaranteed, for a set number of years, also referred to as a term. If the policyholder should pass away within the term of the policy, the insurance company will pay out a lump sum of cash to beneficiaries that was agreed upon and outlined in the policy.
This type of policy and lump sum payment is most often used to cover expenses for the surviving family members or pay off an interest-only mortgage.
Whole of Life Insurance
Whole of Life Insurance is similar to Level Term but it does not have a set term in which it can be considered active. This means that, regardless of the number of years the holder has had the policy, it will pay out a lump sum to the listed beneficiaries. Because of this, premiums for Whole of Life tend to be much higher than others such as Mortgage Life Insurance or Level Term. Whole of Life policies are often chosen when there is a constant need for a lump sum pay-out.
Mortgage Life Insurance or Decreasing Term Assurance
Both Mortgage Life Insurance and Decreasing Term Assurance work in the same way as Level Term Assurance. The only difference is the level or coverage decreases over the length of the policy. Because the insured sum decreases over time, so does the amount of the premium payments.
Mortgage Life Insurance is often chosen when the policy holder wishes to cover an outstanding mortgage – as the outstanding debt decreases, so does the coverage.
Family Home Benefit
Family Income Benefit works in much the same way as Level Term Assurance except instead of beneficiaries receiving a lump sum tax-free, they receive similar payments to the policyholder’s regular income stream. This is the most popular choice when the insured does not want his or her beneficiaries to receive a large lump sum but would rather have them receive regular payments as though his or her income is still present.
Determining How Much Life Insurance is Needed
Choosing the level of life insurance coverage is most often a very personal choice. The factors that play into this decision are all based off the policyholder’s unique circumstances and his or her needs and wants from a life insurance policy.
Some questions you can ask yourself to make the decision easier are “how will funeral costs and outstanding debts be paid when you pass?”, “how will your mortgage be taken care of?” and “how much in a lump sum or regular payments will your family need to survive?”
How the Cost of Life Insurance is Determined
The cost of life insurance, or more commonly the premium payment, is determined by a number of different factors. These factors most often include the type of insurance policy, how much coverage is needed, how long the policy is active, the policyholder’s health and age, his or her lifestyle choices, and whether or not he or she a smoker.
It is important to keep in mind that every insurance company is different – what may be heavy determining factors to some, may be only marginally important to others. This is why it is so important to compare insurance options.
What Else You Should Consider When Receiving a Life Insurance Quote
While the points mentioned above are some of the most important to consider when choosing a life insurance policy, there are some other items that should be reviewed when comparing different policy options.
The first of these additional considerations is your health as the policyholder – if you have any pre-existing conditions or concerning health issues, it may be beneficial to speak with a life insurance agent, like the ones found at Insurance Hero.
Our professionals can help you to find a life insurance company who will work with you even with any concerning health or lifestyle issues.
Additionally, if you have a spouse, you may be considering a joint life insurance policy. For joint policies, it is important to remember that, even though they are most cost effective, they will only pay out one time when the first of the joint policyholders passes away.
While this may be ideal for a couple with no living children and/or family, those with surviving beneficiaries will probably want to secure individual policies.