Life insurance

Whilst it won't help your family get over your loss, life insurance can mean they don't have to worry about money too. Read about the different types of life insurance; life (term) insurance, whole of life, endowment policies

Check to see what life cover you already have through other sources such as your employer or mortgage provider, before you take out new policies.

Life (term) insurance
Term insurance is the cheapest, most basic and popular form of life insurance. It covers you for a fixed period and pays out a one-off tax-free lump sum if you die during the policy term. With some policies you can add on additional options, like critical illness cover. If you do add on critical illness cover, the plan will pay out EITHER on diagnosis of a specified critical illness OR if you die during the period of the policy.

Key pros and cons of life (term) insurance

Pros

If you want to leave a cash sum to your family/loved ones or to pay off a mortgage after you've gone, term insurance may be right for you
It's the most affordable type of life insurance

Cons

The policy only pays out if you die (or are diagnosed with a specified critical illness if you add on critical illness cover) during the term of the plan. If you survive beyond the end of the plan you don't get anything back

Although term insurance always covers you for a set time there are different types, like:

Flat-rate (or level) cover. This offers a set amount of cover for the term of the policy. The amount of cover is fixed when you take the policy out
Decreasing (or mortgage protection insurance) cover. The amount of cover decreases over the term of the policy and is usually designed to tie in with the outstanding amount on your repayment mortgage and the time over which you have taken your mortgage out for
Family income benefit. This type of cover, gives your loved ones a regular income not a lump sum. But the income is only paid for the term of the policy, so the nearer the end of the policy you die (if you do), the fewer years it pays out for
Increasing term assurance. Your premiums and benefits increase each year, usually in line with inflation. If you want to protect your family's lifestyle if the worst was to happen to you, not just pay off any debts, you may want to look at this type of policy
Convertible term assurance. This gives you the option to convert to a whole-of-life policy with the same insurer at the end of your policy. You'll be able to transfer without giving new information about your health, but you will have to pay the going rates for cover for your age