Have you thought about whether you need life insurance? If you found this page then the answer must be a yes! You need life insurance if you have children, a partner, or other relatives that depend on your income. Upon your death, your family members or relatives will receive money from the life insurance policy to cover a mortgage or other living expenses. If you do not have a mortgage or anyone that depends on your income, then you may not need life insurance. This article will take you through the following:
- What is life insurance?
- Do you need life insurance?
- What is the cost of life insurance?
- What is not covered in life insurance?
- Do you already have life insurance or something similar?
- Other types of insurance to consider
What is life insurance?
The purpose of life insurance is to reassure you that your dependents will be able to cover their expenses if something were to happen to you. Your dependents will be paid either a lump sum or regular payments upon your death. The amount of money received by your chosen recipients depends on the level of cover you buy. The payout method is also decided by you. You can decide whether the payout will cover particular expenses like mortgage/rent or not. There are two main types of life insurance policies: –
- Term Life Insurance Policies: This life insurance policy runs for a fixed period of time starting at 5 years. Your dependents will be paid out under this policy if you die during the term. At the end of the policy term, there will not be a lump sum payout.
- A Whole-of-Life Policy: Under this policy, your dependents will receive a payout regardless of when you die. You are only required to keep up with your premium payments.
Do you need life insurance?
You need life insurance if you have children or a partner who depends on your income to live or pay a mortgage or rent. You can also get your funeral expenses paid under your life insurance policy. It is unlikely that your family will be able to live comfortably if they are reliant on the government as this is a lot less than people think, so, if you want to provide financial support to your family after death, then life insurance is a must buy.
What is the cost of life insurance?
The cost of life insurance is dependent on the amount you cover yourself for and for how long amongst several other health factors. You are usually required to pay on a monthly basis and these payments are known as premiums. Here is a list of some of the things on which your life insurance premiums will be calculated:
- Health Condition
- Smoking Habits
- Length of the Policy
- The amount of cover you want
For example, you are likely to pay less premium if you are young and healthy.
Do you already have life insurance or similar?
Some employee packages include ‘death in service’ benefits. In these packages, you pay an amount on monthly basis from your salary to provide financial protection to your family upon your death.
If you think that your death in service benefits are not enough for your family, then you may consider an additional life insurance plan. You should keep in mind that if you discontinue working for your employer, you will lose those benefits.
What is not covered in life insurance?
If you are unable to provide for your family due to a disability or illness, you would not be covered as life insurance usually covers only death. However, some life insurance policies provide a terminal benefit. But terminal benefits are not automatically granted.
You should check the terms and conditions of your insurance policy to know whether terminal benefits are provided in it or not. A terminal benefit will be paid upon the diagnosis of a terminal illness.
There are some exclusions in most of the insurance policies. For example, your dependent will not be paid if you die of alcohol or drug abuse. In some policies, you have to pay extra if you take part in some risky sports. If you are suffering from a deadly disease at the time of taking insurance, then you might not be paid if the cause of your death is linked to that particular illness.
If you are having one of these issues, then you can choose other insurance options to cover. Here are some of those insurance products: –
- Long-term Illness
- Critical illness cover
- Total and Permanent Disability
Other types of insurance to consider
Along with life insurance, you should also think about covering your expenses and mortgage if you will not be able to work due to an injury, illness, or disability with Critical Illness Cover.