Home > Insurance > Life Insurance, funds and Policies

Life Insurance, funds and Policies

By: J.A.J Aaronson - Updated: 25 Jan 2013 | comments*Discuss
 
Life Insurance, Funds And Policies

Life insurance is an important but often overlooked necessity. A good life insurance policy, while not directly benefiting the policy holder within their lifetime, is likely to have a significant impact on the financial situation of the policy holder’s dependants after the death of the former. As such, life insurance should be investigated and taken seriously.

The number of individuals in the UK with dependants but no life insurance policy is shocking. Most of us have home or motor insurance; if we are willing to insure these assets, why are we so reticent to insure our lives? Part of the reason for the chronic under-insurance of the British public is the perceived cost of life insurance policies. While it is true that a good policy can come with significant premiums, it should be possible to find affordable deals that cater to your needs. It is important, however, to understand the difference between the various types of life insurance policy.

Term Insurance

Broadly, life insurance can be split into two categories: term insurance or whole-of-life policies. Under a term insurance agreement, the insurer will pay out if the policy holder dies within a certain period of time (the ‘term’), but will not pay out at all if the policy holder survives this term. There are a number of potential benefits to these agreements. In the first instance, term insurance can be significantly cheaper than whole-of-life policies; if your primary concern is to provide some security for your dependants as cheaply as possible, then this might well be your best bet. Furthermore, if you have some cash to spare, you might well find that it is more financially beneficial to invest the remainder in another vehicle, rather than paying higher insurance premiums.

Whole-Of-Life Insurance

Whole-of-life insurance, as the name suggests, pays out regardless of when the policy holder dies. Generally, these agreements are investments in themselves. As the premiums tend to be higher, the life insurance fund will gradually build over the course of the agreement. Depending on your policy, the insurer may also invest this fund in some other way. If you are thinking about taking out such a policy you should investigate the terms of the investment carefully; the rates of return are likely to be variable, and there may not be a guarantee that your fund will grow in value. Particularly beneficial, however, is the fact that payment to the policy holder’s dependants is not contingent upon the individual dying within a specified term.

It should also be remembered that premiums will vary depending upon the health of the policy holder. If your health is particularly bad, or if you have a chronic condition, you may find it difficult to get insured at all; cancer sufferers, for example, are virtually excluded from the insurance market, although there are a very small number of specialist providers who may be able to offer you a basic policy. As with any such financial choice, it is important to shop around in order to get the best deal. Furthermore, if you are unsure about any aspect of the process, you may find it useful to seek independent advice. This is available in a number of places; a good first step is to find your local Citizens’ Advice Bureau, which should be able to give free information.

You might also like...
Share Your Story, Join the Discussion or Seek Advice..
Why not be the first to leave a comment for discussion, ask for advice or share your story...

If you'd like to ask a question one of our experts (workload permitting) or a helpful reader hopefully can help you... We also love comments and interesting stories

Title:
(never shown)
Firstname:
(never shown)
Surname:
(never shown)
Email:
(never shown)
Nickname:
(shown)
Comment:
Validate:
Enter word:
Latest Comments
  • Howie
    Re: A Guide to Unemployment Benefits
    On 15 July I have to go to court. I may be looking at a driving ban. If I am (hopefully I won't be) will I be allowed to…
    10 June 2019
  • Crazydiamond
    Re: What is SERPS and What Was 'Contracting Out' ?
    Hi i took the serps option in 1988, I am now 58 but unable to trace this pension, can anyone help me in…
    29 May 2019
  • Lolly
    Re: A Guide to Unemployment Benefits
    Hi i am currently working in the care sector my age is 61 i have been trying to get varicose viens removed for 7 years plus…
    16 May 2019
  • Dave
    Re: Taxation for the Self-Employed
    I am PAYE and Self Employed through CIS. I earned £41k in PAYE and a mere £3500 self employed, (before tax) I have a…
    24 April 2019
  • Stanharris
    Re: Renegotiating Your Loans
    Thanks for sharing a valuable information. It is really informative and helpful. the information that you have shared is really useful.…
    4 April 2019
  • Oggy
    Re: Taxation for the Self-Employed
    I’m a construction worker on cis can I claim back my 20% tax back on my first 12k tax is deducted before I’m paid although I’m…
    1 April 2019
  • Caz
    Re: How Much Tax do I Have to Pay?
    Iv just started working for an agency I will be played weekly they not taken out tax and national insurance I have to have my…
    23 March 2019
  • SylviaBlood
    Re: A Guide to Unemployment Benefits
    an you help me pls I had operation on my kidney followed by chest infection I then went profound deaf had cochlear implant…
    19 February 2019
  • sylv
    Re: A Guide to Unemployment Benefits
    i returnee red to work after 2operations I was on ESA support group con based. I went to work I had my hours cut but unable…
    19 February 2019
  • Jax
    Re: How Much Tax do I Have to Pay?
    I earned £924 for working 99 hours last month yet between tax and national insurance Im just bringing home £690 is this right?
    24 January 2019