Although it is often an afterthought for many people, life insurance could actually prove to be the most important financial product you buy in your life time. If you pass away when you still have financial dependents e.g. children, spouse, then having a life insurance policy will help your loved ones carry on without your income. A life insurance pay-out could be used to cover funeral costs as well as pay the mortgage, household bills and University fees. There are lots of different policy types and options when it comes to life insurance, so with the help of the life insurance team we have put together this useful guide to help you make the right choice when it comes to protecting your family...

Term life insurance

This form of life insurance covers you for a specific amount of time, or 'term' - which is usually between 10-25 years, but you can specify how long you want it to be. If you pass away within the specific timeframe, then the policy pays out the amount you have cover for - known as the 'sum assured'. If you do not die within the term, then the policy simply terminates and you have no life insurance cover. Term life insurance is common as it helps to protect your dependents just the period of time you believe they need it - and so isn't as expensive as a 'whole of life' policy. Term insurance can be used to cover the length of a mortgage, for instance, or to wait until your children are at a certain age where they would be able to look after themselves should the worst happen. There are several different types of term life insurance - level term and decreasing term life insurance. Level term life insurance means the sum assured stays the same (i.e. 'level') throughout the time of your policy, whereas with a decreasing term insurance policy the amount will gradually decrease as you get nearer the end of the policy. You can also take out an increasing term life insurance policy, which will mean the amount of payout will increase over time in line with the Retail Price Index.

Whole of life insurance

While term insurance covers you for a set period of time, whole of life insurance - or 'assurance' - covers you for the remainder of your life. This is often referred to as 'assurance' rather than 'insurance' as there is a certainty to whole of life cover - you will eventually get a payout so there isn't necessarily a 'risk' to 'insure'. Whole of life cover is typically more expensive than term life insurance because of this, but it does provide peace of mind that your loved ones will not suffer financially when you are gone.

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