How does Life Insurance work?
Posted on 12th December 2020
None of us like to think about the real reasons we need life insurance, but could your family cope financially if the worst happened to you? Read on to find out how life insurance really works, and how important it is to get the right cover for your personal circumstances.
With life insurance, you pay a monthly or yearly premium (fee) to the provider of the cover (the insurer). If you subsequently die during the term (duration) of the policy, the sum assured (a lump sum of money, the amount of which is defined when you take the policy out) is paid out to your beneficiaries (named recipients of the payout; usually your family).
This payout can then be used by your family to pay off outstanding mortgages, bills, and other expenses which they might otherwise struggle to settle now that you’re no longer around and the family income has drastically reduced.
If 2020 has shown us anything, it’s that no one really knows what’s going to happen tomorrow, next week or next month. Therefore, it highlights how vital it is to have proper financial protection products, such as life insurance, in place to guard against financial woes if something unexpected should occur. Don’t underestimate the “peace of mind” feeling that having good protection in place can bring, too!
A question we’re often asked is “when should I take out life cover?”. The truth is that it’s never too soon to get protection in place, but in reality there are usually certain key life events that bring the requirement for life insurance to the fore; things such as taking out your first mortgage, getting married or starting a family, for example.
Once you’ve got life insurance in place, it’s also important to revisit your cover as time goes by. What was adequate a few years ago may not be what’s required now, i.e. you may have a much bigger mortgage in future which in turn requires a significantly higher sum assured to be covered. Naturally, a higher sum assured will carry a more expensive premium, but don’t forget that peace of mind we mentioned before...!
We can help you with all your life insurance questions and help you get set up with the very best cover available to suit your personal circumstances.
Tagged as: Life Insurance
Share this post: