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Do I need life insurance?
If you are single and have nobody that depends on your income, then you probably don’t need life insurance. But if you have a partner or family who may struggle to cope financially without your income, then life insurance would provide them with the financial support they need at what would be a difficult time in their life.
My employer provides ‘death in service’ benefit, is this the same as life insurance?
Death in service is an employee benefit which will pay out a tax-free lump sum if you die whilst employed by the company. You do not have to die whilst at work, but you do have to be on the payroll when it happens. The amount it pays will vary but is usually between two and four times your annual salary.
Not every employer offers this benefit, and some are linked to the company pension which means you would have to be in the pension scheme to qualify for ‘death in service’ benefit.
What is term life insurance?
This is the most common type of life insurance. Term policies will only pay out if you die within the duration of the policy term. So, if you took a 25-year policy your family could only claim if you died during the 25-year term. If you die after the term ended there would be no pay-out.
Is the pay-out the same amount throughout the policy term?
That depends on the type of life insurance policy you buy. Level term insurance means the pay-out is the same whether you die in year 1 or year 25. Decreasing term insurance is cheaper but the pay-out reduces over the years. This type of policy is often linked to a repayment mortgage as the amount owed to the lender also decreases over the years.
What if I want life insurance for all my life?
Then you will need to buy ‘whole of life’ insurance which has no restrictions in terms of years covered. Your family can claim whenever you die. Be aware that this type of life insurance is more expensive as the insurer will have to pay out eventually.
How much life insurance will I need?
This will depend on your personal circumstances so will differ for each family. For example, if you are married with three children and a big mortgage you will need more cover than a single parent with one child living in a small flat.
Detailed calculations should be made to ensure you have the right level of cover for your family needs, but the usual recommended amount to be insured is 10 times your annual salary.
How much does life insurance cost?
This will depend on many factors: The type of policy, the amount insured, your age, your health and your job and lifestyle. The older you are the more it will cost you, as it also will if you are in poor health.
Can a policy pay out a monthly income instead of a lump sum?
If you chose family income benefit, then yes it could. Your beneficiaries would receive a monthly income, like a salary, when you die.
If you have any queries or questions about life insurance, please call one of our advisors who will be able to help you. Tel 01928 735510 or email us your questions and we will contact you.
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