Life insurance offers an effective way of helping your loved ones lead a comfortable life when you pass away. Usually, your beneficiaries receive a lump sum amount or monthly payouts to help them take care of daily expenses, mortgage or even your funeral costs.
If you’d like to learn more about life coverage, the following 10 FAQs are a good place to start.
What is term life insurance and how does it work?
This is the most common type of insurance designed to protect your loved ones if you pass away within the agreed duration in the policy. It helps settle any financial burden the beneficiaries could face due to the loss of your income.
Put simply, you pay a monthly premium to your insurance provider within the specified term, and upon your demise, your beneficiaries will receive a payout. For example, if you take a life insurance policy for 25 years, your family can claim it if you pass away within those 25 years.
Can I get life insurance through my employer?
It’s common for many employers to provide life insurance in what’s referred to as a ‘death-in-service benefit. As with regular life insurance, it pays out a lump sum if you pass away while in employment and is usually four times your annual salary. While this is sufficient, you might need additional cover depending on certain factors like the amount of mortgage you owe or any other financial provisions for your beneficiaries’ future.
Does the life insurance payout stay the same regardless of when you pass away?
Well, this depends on the policy you take out. For example, in the case of level term insurance, the payout is the same whether you depart in the first year of the policy or the last. For a decreasing term insurance policy, however, the payout becomes smaller over the years. This is suitable for repayment of mortgages because the amount of mortgage also decreases over time.
Can I buy life insurance that will pay whenever I pass away?
Yes, you can buy Whole of Life insurance or what’s known as life assurance. This allows your family to claim your policy regardless of when you depart. For this reason, life assurance is normally more expensive than term life insurance because it’s a guarantee that the insurer will pay eventually.
How much does life insurance cost?
Your needs will determine the life insurance cover you take out. The premiums also vary depending on the type of policy, the risk of the claim and the sum insured’s size. Besides, older persons will pay a higher premium than their young counterparts. Similarly, a person in poor health can expect to pay a higher premium than those in healthier states. Other factors that insurers consider include hobbies, occupation and lifestyle (whether you smoke and your weight).
Can the policy payout regular income rather than a lump sum?
Sure! You can go for a family income benefit. With this plan, your beneficiaries will receive a monthly payout if you’re diagnosed with a critical illness or pass away during the contract period.
Can I still get a policy if I’m older or have a preexisting condition?
Yes, but the cost of premiums may be higher as a result. It’s still possible to buy life insurance when you’re over 50 years and some firms will even accept you without health questions.
Will a life insurance policy always pay out a benefit?
Many policies feature payout exclusions e.g. suicide or drug-related death. Insurers may also decline to pay in case of non-disclosure where the insured has not notified the insurer of changes. For instance, the policy would be voided if the individual claiming began smoking after being insured but didn’t notify the insurer.
Do I need life insurance if I am healthy and young?
When taking out life insurance, the most significant factor is whether anyone else will lose financially upon your passing away. Do you have family members who would struggle to take care of household expenses? Will your partner be able to pay for your joint mortgage if you departed today? All these are critical questions to ask yourself. Regardless of your age, life insurance is necessary if someone relies on you for financial support.
Should people with mortgages buy life insurance?
Yes, this is one of the few reasons why you should consider a life insurance policy. It provides reassurance to your loved ones that their home is safe even after you’re gone.
Can I make changes to my policy?
While you can usually make amends to your life insurance policy, this could raise the premiums. You should also update your insurer about any changes concerning marriage, a new home or a new addition to the family.
Have another new question that we didn’t answer in this guide? Let us know in the comments and we’ll be happy to add it here.
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