When deciding on the right life insurance policy for you, it may be worth taking into consideration the amount of money you would need to leave behind in order to protect your loved ones, should anything happen to you. This sum should take into account their financial situation, as well as any outstanding debts you may have, such as a mortgage.
Mortgage Protection Life Insurance may be a good option to consider if you're looking for a policy to pay off a repayment mortgage after your death. You select the cover and term to match your mortgage debt. With this policy, as your mortgage decreases the level of cover will decrease over the term. This can be a cheaper option because the cover reduces and typically this type of policy only covers your mortgage repayments and not any other debts you may have, such as credit card debts or bank loans. This policy could be right for you if want to ensure that your partner will not lose their home as a result of your passing.
Level Term Life Insurance provides a fixed level of cover, defined by you, for the policy term - so premiums tend to be higher. You may want to consider this option if you have dependents who may struggle without your income, such as children or a partner. This kind of policy may help those left behind with any outstanding debts and mortgage repayments. You could use a level term policy to leave a little extra behind to cover future expenses like university fees or holidays and even cover the cost of your funeral.
Our guide on How To Choose Life Insurance can assist when you are looking to select a suitable type of policy for your circumstances.
People often ask How Are Life Insurance Costs Calculated? Your life insurance premium is dictated by the amount of cover that you require, the number of years your policy will run for, the type of policy that you decide to take out and various personal factors.
These factors can include your age, general health, medical history, lifestyle, the regularity that you travel to foreign countries (where health risks may be higher), and the level of danger that your hobbies or job may expose you to. The financial needs of your dependants - such as existing debts, school fees, mortgage and reliance on your take-home pay - can all help you determine a level of cover suitable for your situation.
Should your life insurance policy be written in trust, the policy proceeds can often be directly paid to your chosen beneficiaries within just a few days of a claim being raised. Writing a policy in trust may also help avoid a payment being liable for inheritance tax if it's above the threshold set by HMRC.
When a policy is not written in trust, the proceeds will count as a part of your estate, so they will also have to go through probate which could be more time-consuming.
If you have any questions about policies, such as information about when your employer provides life insurance, or how the time of death within the term of a mortgage protection life insurance policy can affect pay out, please consult our Life Insurance Guides, where you'll discover information you may find useful.