If you die unexpectedly, this provides some financial security for people who depend on you.
There are two main types of life insurance: whole-of-life insurance and term insurance.
- Whole-of-life insurance pays out an agreed sum whenever you die.
- Term insurance is the cheaper of the two, as it pays out the agreed lump sum only if you die within the term you’ve agreed. Once the term has ended, you get nothing.
Life insurance (especially term insurance) can be taken out to cover mortgage repayments. It is worth noting that endowment mortgages automatically include life cover.
- Mortgage protection insurance is a type of term insurance where the amount of cover decreases over the term of the policy. It is usually designed to tie in with the outstanding amount on a repayment mortgage.
- Family income benefit is the cheapest type of term insurance, which pays out an income (rather than a lump sum) for the rest of the term.
- Check – if you don’t have any dependants, you will probably not need life cover.
