Life Insurance Made Simple

Life insurance can be very confusing. Most people don’t know how it works and so have no way of working out if they need it.

So let’s clear a couple of things up here.

Q1: Do I need Life Insurance?

The main purpose of life insurance is provide financial certainty for those you leave behind when you die. If you don’t have a family then there’s probably no reason for you to have life insurance. Or, if your family is self sufficient and will not be under financial strain when you die, then again you probably don’t need life insurance.

But if you have people who rely on you then you should consider life insurance. In this case when you die the life insurance is used to cover the mortgage, kids’ education, living expenses etc. Think of it this way… “what would happen to your familiy if you died and you didn’t have any life cover?”. This will tell you if you need life insurance.

Q2: What type of Life Insurance should I have?

The first thing to consider here is… what is the insurance for? This will answer if you need “permanent” or “temporary” life insurance. Permanent life insurance is life long coverage whereas temporary life cover is for a set number of years. Here’s a summary of both…

Permanent Life Insurance e.g. Whole Life, Universal Life & Variable Life. Used by people who want to provide financial security to their Beneficiaries, such as Spouse.

• Provides insurance for life
• Premiums are typically fixed
• More expensive than temporary life insurance, around three times or more
• The younger and the healthier you are the lower the premiums

Often used to older people who want to make sure their spouse can live in comfort when they die.

Temporary Life Insurance e.g. Term Life Insurance. The main purpose of temporary life insurance is to provide financial cover for specific items that have a finite duration e.g. your home mortgage.

• Provides insurance for a fixed term, e.g. 1, 2, 5, 10, 30 years
• Premiums are generally fixed for the term
• Is much less expensive than permanent life insurance
• Premiums are based on age and health

Typically, younger families will opt for this form of life insurance as it provides protection to the family until the mortgage is paid off and the kids are finished school.

A common feature of modern term life policies is a guaranteed renewal. The premium will increase but there’s no medical check required. This can be the best option for many families i.e. lower initial premiums but with a renewal guarantee.

Because evenyone’s needs are different, you should speak to a life insurance expert before making any decision. You can contact one of our
.