The truth is, the answer is different for everyone and will depend on your personal circumstances.
Someone who is the main breadwinner and has a young family might find that the best Life Insurance policy for them isn’t the same as it would be for a working couple with no dependents…or for someone who is over 50…or for someone who is living with a condition such as diabetes…
So, let’s take a look at which Life Insurance is best for you.
What Is Life Insurance?
Let’s just get this bit out of the way before we talk about finding the best Life Insurance for you…
What exactly is Life Insurance?
Put simply, it is a type of insurance that typically pays out a lump sum to your family when you die, helping them to pay off large debts such as a mortgage, replace lost income, cover funeral costs, and generally ease some of the financial strain during a stressful and upsetting time.
I say, ‘typically’ because there are policies you can take out that don’t pay the money out all in one hit (we’ll get to that in a moment), but this is how the majority of Insurance policies work.
Understanding What is the Best Insurance For You
When trying to find the best Life Insurance policy for you, it helps to know all of the different types that are available.
1. Term Life Insurance
What is Term Life Insurance?
Term Life Insurance is where you choose the amount you want to be insured for, as well as the length of time you want to be covered for – known as the ‘term’.
If you die during the term your policy will pay out the amount that you are covered for.
If you don’t die during the term, the policy doesn’t pay out, and the premiums you have paid in aren’t paid back to you.
Level Term – The payout your family will receive remains the same throughout the life of the policy. For example, if you are insured for £100,000 over a term of 30 years, your family will receive that amount whether you die in year 2 or year 29 of the policy.
Decreasing Term – As the name suggests, the amount that your family will receive decreases during the term of the policy. Decreasing Term Life Insurance is often the best option for people who have a mortgage to pay off.
This is because the money needed to pay off the debt decreases with time.
Increasing Term – The opposite of decreasing term; the later into the term you die, the more your family will receive.
This can be the best type of Life Insurance for those who are worried that inflation means the payout won’t stretch as far towards the end of your policy as it would at the beginning.
2. Whole Of Life Insurance
This type of insurance pretty much does what it says on the tin; it is an ongoing policy that pays out when you die – whenever that may be.
This is because insurers know that you will definitely die at some point, and therefore they know they’ll definitely be paying out.
Well, it’s a good option if you want to leave money for your loved ones regardless of whether there’s a mortgage or debts to pay off or not.
Again, you have a couple of options:
Balanced Cover – This is where your premiums stay the same throughout your policy, even as you get older or your health deteriorates.
Maximum Cover – This one’s slightly more complicated. In this case your Life Insurance cover is linked to an investment fund. Your insurer will invest your premiums every month, hoping that the returns on the investment will eventually cover the cost of the payout when you die.
Your premiums don’t stay the same with a maximum cover Life Insurance policy. They will be reviewed, and if the investments aren’t performing well, your insurer may well increase your premiums – or reduce the amount that will be paid to your loved ones when you die.
3. Over 50’s Insurance
Could the best Life Insurance for you be an over 50’s policy?
This could be the best insurance for you if you no longer have a mortgage, your children are grown up and no longer need your financial support, and you want to leave something behind mainly to cover your funeral costs.
Or if you want a free pen.
The main advantage of taking out over 50s Life Insurance is that you’re guaranteed to be accepted so long as you fall in the 50-80 age bracket. You won’t be asked any medical questions, and the cover will last you for the rest of your lifetime.
If you died only a few years into your policy, your family’s payout would be more than you paid in – which is a bonus (apart from the dying bit, obviously), and the monthly premiums are cheap; you can get cover for just a few pounds a month.
Unlike Term or Whole of Life Insurance where you can insure yourself for as much as you like, over 50’s Life Insurance policies cap your payout – typically to about £15,000. This means, of course, that the longer you live, the higher chance there is of you paying in more than your family is going to receive.
But, let’s say you’re not over 50…and your worry about Term or Whole of Life is that your family will struggle with budgeting a lump sum payment if you were to die.
A huge amount of money in one go can be a lot of pressure for some people, and if your concern is that the money won’t be spent as you intend, and that your family still might end up struggling in the long run, Family Income Benefit Insurance might be the best Insurance for you.
4. Family Income Benefit Insurance
This type o iInsurance isn’t as well-known as the other types I’ve mentioned but is a type of Insurance policy that pays your loved ones a regular income for a set period of time after you die.
When you take out the policy it’s up to you to choose the income you want your loved ones to receive, and for how long. Then the insurer would work out the monthly premium you would need to pay in order to secure that cover.
Let’s say that you’ve taken into account your family’s outgoings – rent or mortgage bills, food, clothing, Christmases and birthday etc, and have decided that they would need £3000 a month for the next 30 years in order to continue living comfortably if you were no longer around.
If you were to die during the first year of taking out your Family Income Benefit Insurance policy, your family would receive that monthly payout for the full 30 years. If you were to die in year 25, they would only receive monthly payments for the remaining 5 years of the term.
If you die AFTER the term of your policy, your family won’t receive anything.
The big advantage to Family Income Benefit Insurance – and the reason a lot of people decide this is the best type of protection for them – is that it’s normally considered the most budget-friendly type of Life Insurance.
Of course, the actual cost of a policy will depend on factors such as your health, lifestyle and age – as well as the amount you want the policy to pay out – but, because the insurer is less likely to have to pay out a huge lump sum (and even if the do – not all in one go), your premiums will be cheaper than Term or Whole Of Life.
Ok, so you might now have more of an idea of which type of Life Insurance is going to be best for you. But which insurer offers the best insurance?
Again, there’s no easy answer. The insurance market is incredibly competitive, and there are policies out there offering policies of varying comprehensibility – some offering free gifts, and even the chance to earn rewards and lower your premiums as your health improves (Vitality Life Insurance is a good example)
So, where do you go to find the best Life Insurance for you?
Ads on the TV, price comparison sites, and recommendations from friends are often people’s first experience of the different types of insurer out there – and all of those options have their place when it comes to doing your research.
However, before purchasing any type of insurance policy, we would always recommend speaking to an independent broker such as ourselves. We have access to all of the insurers and their policies, and we know what you’re likely to be asked, and how likely you are to be accepted.
If you want to find the best Life Insurance for you, why not give us a call and see how we can help.