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There are generally two types of Life Insurance available to the consumer, “investment” and “term” or “protection only”. The difference being a term policy will pay out if you should die before a certain date, and an investment policy will provide a lump sum on a particular date or when you die.
Term Life Insurance
Of the two main types, term is generally a cheaper option and most frequently runs alongside a mortgage product with monthly payments. This type of policy guarantees a payout if you should die within a specified period of time but will not pay out if you do not die before the end of the “term” of the policy. This term could be the length of time left on your mortgage, or until any financial dependents (e.g. children) reach a certain age.
Investment Life Insurance
Potentially a riskier product, you would still normally pay monthly to an investment life insurance policy with payout amounts dependent on how successfully the investments in the insurance fund have performed. Some policies of this type pay out only on death, whereas others will pay an amount on a certain date or upon death.
Policies that pay out upon death only will pay the whole of the life insurance, and policies that pay out whether you die or not include:
• With-profit bonds
• Unit linked bonds
• Income and growth bonds
• Maximum investment plans
• Endowment policies
• Other life insurance that builds up a value you can cash in
Life insurance Life insurance can also be referred to as after life assurance, because most people purchase insurance for the peace of mind and assurance that if something happens to them their families are taken care of. It can be confusing to navigate through insurance policies however as there are many different providers, different types of insurance policies, and factors that need to be considered in order to choose the correct insurance for you and your family.
Usually you can find the most competitive deals and the most reliable life insurance policies from the larger providers that serve the UK. Some of the most well known and largest life insurance providers in the nation include Bradford and Bingley, Direct Line, Friends Provident, Marks and Spencer, Sainsbury’s Bank, Prudential, Tesco, and Skandia.
One of the first things you should look into when you decide to purchase life insurance are the terms that are involved if you need to cancel or adjust your life insurance plan. Some policies are flexible and allow you to change your conditions and terms as situations occur. On the other hand some life insurance plans will only offer you one set path that if you cancel you will lose all the money and benefits that you may have paid in.
Also, it is useful to know that some life insurance policies do not just cover the possibility of death, but also in the case that you become disabled or face a serious illness. These are usually more costly but can provide extra security as life can always take an unexpected turn.
In general, when it comes to choosing a life insurance you need to research to find out if the policy you want is an investment type life insurance or one that provides protection only. Some people feel that protection only insurance is the best choice because it is the cheapest way to purchase life insurance. However, if you do not die within the range of years the term is set at, you lose your entire investment.
Investment life insurance on the other hand covers you throughout your life span and requires the purchaser to continue paying into throughout the entire policy. While this can add up over a long period of time if you live a full life, the payout at the end is much larger to your surviving relatives and you have the satisfaction of knowing that your family is protected in the case of your death.
Additionally, these plans also allow you to cash out your policy and receive your money in a lump sum if you outlive the terms of your agreement. These types of life insurance policies are generally referred to as endowment policies but are not always the best for protecting your family as the money accumulates over time so a sudden death would not leave your family with much financial support. For this reason many times these plans are considered to be more associated with financial planning than protective planning.