Life Assurance is an assurance that on your death an agreed lump sum will be paid to your family. Also known as Whole Life Insurance, this form of life cover is more expensive than Standard Life Insurance because the provider will always have an agreed lump sum to pay out.
Life Assurance requires you to continue paying throughout your life and a missed payment will invalidate the entire policy, though there are some policies which will enable you to stop paying at a certain age, usually 85. You need to consider at what age the value of your contributions will exceed the value of your pay-out. Many of these policies do not require a medical so if your health is poor, taking out a Life Assurance policy could be financially advantageous. You need to be aware that the buying power of money that you pay in now will be much reduced in twenty or thirty-years’ time. The Office for National Statistics site will give you an idea of average life expectancy and help you decide whether you would be paying more in premiums than the value of the pay-out.
Life Insurance, usually referred to as Standard Life Insurance, covers you for a set period and is available in a number of forms. The policy can be purchased
for a set period between one and thirty years and pays out an agreed sum according to the value of the policy you’ve taken out.
A decreasing term policy will enable you to pay lower premiums as time passes but the lump sum pay-out will also be reduced accordingly. If you are a couple, a cheaper option is a Joint Life Insurance, which will pay out on the first death. This leaves the survivor with a lump sum but without life insurance and of course, the older you are, the more expensive life insurance becomes. On average a twenty -year old could expect to pay around £10 per month, whilst a seventy-year old would pay in the region of £40 per month for the same level of cover. Another consideration is that if the relationship breaks down a provider might not be able to divide a joint insurance into two singles.
The charity Aegon estimates that 36 million UK citizens are without a financial safety net. Spokesperson for the charity, Simon Jacobs says ‘Across the UK, people insure their homes, pets and mobiles, but overlook the vital component that funds all their day to day spending-themselves’.
Making a decision about what type of insurance policy to take out and what level of cover to opt for is always going to be difficult. Few of us relish thinking about our death and it is always tempting to spend money now rather than invest it for some indeterminate point in the future.
The type of life insurance that you choose to invest in will be determined by your age and personal circumstances. When trying to decide, be sure to compare several options in order to find the right policy for your situation. If you are single and have no dependents you might decide that life insurance is superfluous, but if you have a mortgage and dependents, life insurance will provide peace of mind for you and financial security for your loved ones.