Life Insurance Frequently Asked Questions
Why should I have life insurance anyway? Here are some answers to commonly asked questions
Most insurance policies are designed to protect the property of the insured. Life insurance is designed to protect dependents from the financial impact of your serious illness or death.
Some mortgage lenders require homeowners to have life insurance. This provides assurance that the mortgage balance will be repaid if the homeowner dies before the mortgage loan is satisfied.
Should people without mortgages purchase life insurance?
Yes, because a life insurance policy can be used for various purposes. Basic term insurance can run for the duration of the mortgage. Decreasing term insurance features coverage that decreases over time.
If I am young and healthy, do I really need life insurance?
The main factor when considering whether life insurance is worthwhile is whether another person will suffer a financial loss upon your death. Will family members be able to make mortgage payments and pay household expenses?
If you have a joint mortgage with a partner, does that person depend on your income to help repay the mortgage? Regardless of your age, if someone relies on you for financial support, it is wise to purchase a life insurance policy.
If I already have life insurance, can I still save money?
During the past decade, life insurance premiums have drastically declined. If you purchased coverage several years ago, you will probably find the same level of coverage now offered at a reduced cost. However, this may require switching to a new insurer. A thorough search of the market is necessary to find the best deal and we do this for you at no charge.
Will a life insurance policy always pay a benefit?
Many policies feature payout exclusions including suicide. Insurers also may not payout due to a situation about which the insurer has not been informed. For example, a life insurance policy would be voided for an individual claiming to be a non-smoker who begins smoking after being insured but does not notify the insurance company.
Am I able to structure a life insurance policy to make continuous monthly payments instead of a lump sum?
Yes, and this is typically done by purchasing a family income benefit policy. This coverage makes a monthly payment to beneficiaries, designed to replace the wages of the deceased (or possibly, critically ill) insured. A family income benefit policy usually costs less than a policy that pays a lump sum because the insurance company does not fund the entire benefit at one time.
When determining life insurance policy benefits, should funeral arrangements be considered?
Pre-paid funeral plans can be purchased separately but these can be expensive. Adding funeral arrangement costs to the coverage level for a life insurance policy can be less costly.
What are the main types of life insurance?
Why do some companies refer to term insurance as temporary insurance?
This wording is used because term insurance provides coverage for a specific timeframe, referred to as the term, not the lifetime.
What are increasable term and increasing term life insurance and how do they differ?
Both policies accommodate increased costs that an insured may want to cover during a policy period. An increasable term policy offers the ability to increase premiums at specific times like the policy anniversary date or when a particular event occurs. With an increasing term policy, the premium is automatically increased by a pre-determined amount such as a fixed percentage per year or based on current inflation levels.
As the premiums increase on each policy, the coverage amount also increases. For example, if a £100,000 policy features a five percent premium increase, the coverage will increase by the same amount, resulting in £105,000 worth of coverage.
What is decreasing term life insurance and when is it appropriate?
With a decreasing term life policy, premiums and coverage decline over time. A person who wants life insurance coverage that protects mortgage payments typically selects a decreasing term policy because the amount owed to the building society or bank decreases each month throughout the policy term.
A lender may refuse to provide a mortgage without proof of life insurance but a lender may not force an individual to purchase its life coverage.