Discounted Life Insurance 101
Most people get to a certain stage in life and realize that life insurance may be a good idea. This kind of policy may not be designed to help them directly but it may well be a huge benefit to the partners and family they leave behind. For many, this stage happens when they first buy a home or when they get married and settle down to raise a family.
Discounted Life Insurance
When we get to this stage in life we may start to worry about how our families might cope if we were to die suddenly. You may, for example, be responsible for paying a large chunk of your mortgage, debt commitments and everyday costs out of your salary. If your salary were to be taken away then you may need to consider what may happen at home. In many cases the partners left behind may not have the cash coming in to cope alone.
A life insurance policy may give you some protection against this happening. These policies are designed to make a payment if the insured party dies. This payment may well give your family the kind of cash they need to carry on without you. For many people this just gives them peace of mind about the future.
There are two main types of life insurance that you may want to look at at this stage. These are:
- Term cover — this policy is set up to last for a fixed number of years called the term. If you die during the term then the policy is designed to pay out the sum you were insured for. If you die after the policy’s term is over then your family won’t get any money.
- Whole of life cover — unlike term insurance a whole of life policy won’t run out after a specific number of years. It doesn’t matter when you die with this kind of insurance as the insurer commits to paying out when you die on a guaranteed basis (subject to a successful claim of course).
Apart from the obvious differences between these two types of life insurance there may often be cost differences to consider as well.
Term policies are usually cheaper than whole of life ones as there is no guarantee that the insurer ever has to pay out on them. You also get to the stage where you no longer have to pay premiums when you reach the end of policy. Whole of life cover may well be more expensive overall. You may have to pay premiums until you die and these may be higher than those that come with a term alternative. But, the extra payments made give a guaranteed payment when you reach the end of your life.
The lower costs of term insurance policies and the fact that they may be set up to give cover until your family may not need it any longer often make this the more popular choice for many people. The choice you make may, of course depend on your finances and your circumstances.
Taking out a life insurance policy may well hopefully work out to be a protective measure. After all, you aren’t going to hope that your family is ever able to claim on a term policy that you take out! Working out what it may do for you and whether you need it may be a good first step if you think you may need this kind of cover.
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