Life insurance UK basics
Life insurance helps you protect your loved ones from financial difficulties that could face them if you were to die, such as difficulties paying university fees, household bills, mortgage payments and childcare costs. Life insurance in the UK is a legal contract you enter with an insurer who guarantees to pay out cash sums to your loved ones if you were to die when your chosen policy term was in effect.
How it works
You choose the type of life insurance cover you want, the amount of cover you can afford and the length of time you need covered for. For instance, if you want your loved ones to get help to pay university tuition fees when you were no longer with them, you would need to consider the sum total university tuition fees required and the number of years required to offset the university tuition fees. You then enter into contract with an insurer and pay a predetermined monthly premium for the duration of the policy term you request and get.
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Types of life insurance
The two most common types of life insurance in the UK are life assurance and mortgage life insurance. Life assurance, also known as life cover or level term assurance, helps ensure your loved ones are protected financially should you not be with them to provide for their financial needs. It typically pays out a cash sum to your loved ones if you die during the term of the policy. It is important to realise that the cover is not an investment or savings product and, therefore, it has no real cash value unless a reasonable claim is made.
Mortgage life insurance, on the other hand, pays out cash sums to your loved ones to help pay off the mortgage if you die during the term of the policy. The cover helps you ensure that you family and loved ones will continue to live in the family home without worrying about how they will pay off your mortgage. It is important to realise that mortgage life insurance is also not a savings or investment product and, therefore, has no real cash value unless a reasonable claim is made.
Why life insurance is important
There are people who think life insurance is not worth it. This is particularly the case because many of us think mishaps are not going to happen to us. Many people ask why they should 'waste' a monthly life insurance UK premium on a policy they may never need. However, consider that you insure most of your valuables at home like TVs, computers and even your car. Isn’t it also important, if not more important, for you to insure the financial future of your loved ones as well?
The reality is that critical illness or even death can come on anyone of us at any time and bills don’t stop coming when we die or are critically ill. Life insurance can make a big difference in such unforeseen eventualities and help you overcome arising financial challenges. Importantly, life assurance gives you peace of mind knowing that your family and loved ones are financially covered should you not be with them any more.