According to the Association of British Insurers, often shortened to ABI, the insurance industry handles over 1.5 trillion pounds worth of assets. That was calculated based on data from 2016, so that value may be higher now.
Many of those assets come from life cover, which is also known as life insurance. Life cover is a type of insurance that pays out upon the death of its holder.
This is only a simplified definition, though. There are a few things that aren’t covered by this type of insurance.
There are also certain types of insurance that may go hand-in-hand with life cover. We’ll go into more detail about life cover in this article.
1. Do You Need Life Cover?
The simple answer to this question is yes. In almost all cases, life insurance is going to help your loved ones pay for your funeral and perhaps pay their bills for some time after your passing. If you don’t have loved ones or beneficiaries, life insurance may not be as important.
It’s still better to have it than not, though, regardless of your situation. People make all sorts of mistakes when it comes to life cover, so it pays to be careful, in this case quite literally.
2. Choosing a Company
Figuring out if you need life cover is one thing. Actually getting it is another.
It can be a bit of a confusing process, but it doesn’t have to be. The first step in getting life insurance is choosing a company to get it from. It’s best to be cautious here because not every company is going to offer you the same deal.
One company might charge you a slightly lower premium for significantly less coverage. Others might charge you more for the same amount of coverage. Do your research before deciding what company is right for you.
If you aren’t sure what the best deal is, and it can be very difficult for anyone not in the insurance business, talking to a financial advisor or similar professional can help.
3. How Much do You Need?
When choosing life cover, it’s important to know how much you need. Figure out the cost of the average funeral, and whether you want an average funeral. You save money that way, but many people want their final goodbyes to be a little more memorable.
The next thing to consider is the beneficiaries. Who are you leaving things to, and what are you leaving them? If you’re leaving them money, ask them how much they’re likely to need.
There’s also the question of how much you want others to have. Many people would prefer to pay higher premiums to ensure that their loved ones can live more comfortably when they’re gone.
4. Providing Information
You’ll be required to give your insurance provider certain basic information about yourself. This will mostly include health-related factors, such as personal and family medical histories, your occupation and hobbies, and your age.
These factors will determine whether or not a company will insure you and what the details of your insurance policy will be. For instance, a company may choose to give higher premiums to someone who has a lot of medical issues, or who works in a high-risk job.
Some companies may decide not to insure you, and that’s okay. You can always get life insurance from another company.
5. Term Life Insurance
Broadly speaking, there are two types of life insurance, term life, and whole life. The two differ in purpose and how long they last.
Term life insurance isn’t permanent. You choose a policy that covers a specific period of time, often decades, and if you die during that time, the policy pays out.
The problem is that like a lot of insurance policies, companies don’t want to give term life insurance to someone who’s likely to need it. For instance, a healthy 25-year-old will probably get a better deal than a 50-year-old with a history of heart problems.
Term life is not recommended as a primary source of life insurance. If you’re in a transitional period where you’re between jobs, undergoing a divorce, etc., it can be very useful.
6. Whole Life Insurance
Whole life or whole-of-life insurance is exactly what it sounds like. It’s insurance that covers you for your entire life and is guaranteed to pay out at some point.
Whole life policies are often more expensive, but the security is worth it. They also come with a few other benefits.
One of them is that you can actually withdraw money from your policy if you need it. Be careful, because the more you take out, the less the policy will pay your loved ones when you pass.
Taking out a bit for major life expenses shouldn’t cause too much trouble. There aren’t too many major events in the average lifetime. There are weddings, college tuition for your children, and retirement.
Life Cover: What It Does and Why You Need it
It’s not an exaggeration to say that everybody should have some form of life cover. Funerals are expensive these days, and it feels like their prices are rising constantly.
There are also other expenses to consider, like the money your loved ones might need to pay bills after your passing.
We’ve gone over the basics of life insurance in this article, but we didn’t have the space to cover everything. You should consult an insurance agent or financial adviser for any additional questions.
If you’re in the market for life insurance, please visit our site. If you need any help, feel free to contact us.