Have you got the right type of life insurance in place for you?

Choosing the right kind of life insurance for your individual needs can be challenge – especially since we may need different kinds of coverage depending where we’re at in life.

For some, the array of life insurance products on offer can even feel a bit daunting. Around two thirds of UK adults don’t have any life cover so if you’ve ever put off getting yours sorted, you’re not alone.

At HWIFM, we won’t tell you which type of insurance to choose but we will give you impartial advice to help you make an informed decision.

Take a step towards making the right decision for you by finding out which type of insurance could be the right one for you.

Which life insurance product is right for me?

There are a number of different types of life insurance, but the main four are:

• Term life insurance – life cover that runs for a fixed length of time.
• Whole life insurance – life cover that is in place until you die.
• Joint life insurance – life cover for you and your partner.
• Terminal illness cover – a policy that pays out if you are diagnosed with a terminal illness.

Which you choose will depend on your own circumstances, for example your family situation, dependents, future goals, and your available budget.

You could be in a position where you may benefit from having more than one type of policy. Here’s an example of what that might look like in practise:

Greg and Louise have a joint policy that will pay off their mortgage, should one of them die. But Louise also has an individual policy in place that, in the event of her death, will secure the financial future of her children from a previous relationship.

Type 1: Term life insurance

These policies run for a fixed period of time (the “term”) and only pay out if you die during the term of the policy. There are three kinds of term life policies:

• Level – pays a lump sum if you die within the agreed term, such as 5, 10 or 25 years.
• Decreasing – the level of cover reduces each year. This is the type designed to be used alongside repayment mortgages. Once the mortgage is paid off the policy ends.
• Increasing – the level of cover rises over the term of the policy to keep up with inflation.

For example: Callum is a single parent with 3 young children and no mortgage. He’s worried about what would happen to his children if he died, so he has a fixed 20 year increasing term policy that will be in place until the youngest of his children has reached adulthood. He’d rather not pay into a policy for longer than he needs to.

Type 2: Whole life insurance

These types of policy pay out no matter when you die, so you’re covered for life. As such they tend to cost more than shorter-term policies and if you live longer than expected, you could end up paying in more than you recipient would eventually get out.

For example: Walter took out a whole life policy when he and Mary got married 50 years ago. They’ve long since used up their savings to eke out their pensions, and now Mary would be struggling to pay for Walter’s funeral if it weren’t for the pay-out from this policy. Knowing it’s there, offers the couple piece of mind so they concentrate on their time together.

Type 3: Joint life insurance

As its name suggests, this type of life insurance covers two lives and pays out if one half of the couple died, and then the policy ends.

It’s cheaper than investing in two individual policies. The “two lives” don’t need to be a married couple, or even romantically involved for that matter. However, it’s worth considering that if the relationship ends, the insurance provider may not be able to divide the joint policy into two single policies.

For example: Marie and Elaine both work. They have no children but a mortgage and other liabilities. They have a joint policy which will pay off all their outstanding debts if one of them dies.

Type 4: Terminal illness cover

Being diagnosed with a terminal illness is devastating and no one wants to think it may happen to them, but the resulting financial burden can be avoided with this type of policy.

The policy pays out on diagnosis rather than death. Most life insurance policies do include terminal illness cover, but with some it’s only as an optional extra. Terminal illnesses that qualify for a payout can include cancer, heart disease, and lung disease.

If you’re less than 18 months into your policy or it only has a year or so left, or if you already had the illness when you took the policy out, you may not be entitled to a pay-out.

For example: Alex was married with two very young children, had a very large mortgage and was the sole bread-winner for the family. He was diagnosed with terminal cancer and quickly became too ill to work, so the only source of family income stopped. His policy paid out on his diagnosis and he was able to pay off the mortgage with the lump sum.

Which type of life cover should I get?

Only you can decide which, if any, life insurance product is right for you. You may not even need a policy if, for example, your employee package at work includes death in service benefits.

Your needs and circumstances throughout your life will change, so you may wish to review your policy every once in a while to make sure yours is still fulfilling all your needs.

If you feel that life insurance might be a good idea for you or if you’d like to explore your options, the team at HWIFM are here to provide you with impartial, specialist guidance. Book an appointment with one of our advisors today and make an informed decision based on what works for you.

Call the HW team today 01606 338914