When it comes to a subject matter like life insurance, there are often a lot of question marks and grey areas that tend to be experienced and in need of clarification. Few people tend to be aware of the fact that life insurance is an important part of the home buying process and it is something that is important to look into in greater detail for one’s own peace of mind. Here at LoanPig we value the importance of being clued up on all financial matters which is why we have compiled the following life insurance guide…
What is life insurance?
In short, life insurance is an agreement between an individual and an insurance provider that promises that the insurer will pay out a particular sum of money in the event of the individual’s death. This can be paid out in a fixed period of time in return for premiums paid in prior. Life insurance can sometimes be confused with ‘whole of life’ insurance. Whole life insurance guarantees a cash lump sum upon the death of an individual regardless of when they die and is typically more expensive than term life insurance which is normally offered between 10 and 25 years.
Why would you need life insurance?
Life insurance can be a valuable form of insurance to have as it offers your family or dependents that peace of mind of knowing that any debts and liabilities can be paid in the event of one’s death. Individuals tend to take out a policy to cover them over the course of their mortgage but life insurance can also be helpful for individuals who are renting also.
Where can I get life insurance from?
You can look towards taking out life insurance at any point in your life; however the majority of people tend to do so when they are due to buy their first home. Life insurance can be obtained from mortgage brokers and estate agents as well as comparison websites and individual insurance companies too.
Life Insurance Types
When looking to obtaining life insurance, there are a number of different policy types that you can choose from:
- Level term policies: This policy states that the amount you pay in will remain at the same value throughout the duration of the agreed term.
- Decreasing policies: The cover that you obtain is created in line with your particular mortgage repayments and the premiums do tend to stay the same, however the main benefit of a long term policy such as this is the fact that you will be able to keep on top of the amount of cover you have.
- Guaranteed/ reviewable policies: A guaranteed policy essentially meant that your monthly premiums remain the same throughout the term. Reviewed policies are reviewed at particular points of the term and are less favourable by some as they mean that you could potentially pay more in the long run for our life insurance.
Things to look out for?
When it comes to life insurance policies there are a certain number of things that you should look out for to ensure that you sign on to a policy that is best for you and your needs:
- Commission fees: Some mortgage brokers and estate agents can try to take huge commission fees from insurers and while commission fees should be included in your quote, it remains all the more important that you research for the most competitive rate.
- Cancellation fees: Something to always keep in mind when it comes to taking out an insurance policy is to check the cancellation policy. Some brokers can absorb the costs while some other can pass them on to the customer.
- Check you have a good deal: As is good practice with most purchases, it’s important to not simply rely on the first quote you get but to check around that you are getting the best possible quote. Be sure that you are always choosing from a variety of different companies and not just one.