Life insurance is a simple way of giving your loved ones peace of mind for the future ahead. These days, life insurance can be bought in just a click of the button. In this article, we help you understand how online life insurance works and the type of cover you may need.
How does life insurance work?
Life insurance is designed to provide financial support to loved ones when you pass away. Once this happens, your insurer pays a lump sum amount to your beneficiaries. This money can be used to help your family with future finances, such as:
- Everyday living expenses
- Mortgage repayments
- Funeral costs
- Outstanding loans and debts
- Estate planning
When taking out a life insurance policy, you start paying monthly premiums to your insurer. You need to continue making monthly payments in order to remain covered. If not, your insurer may cancel your cover early. The cost of these premiums is calculated by a range of factors, such as:
- You age – The older you are, the higher your premiums will be
- Health – This can often include medical history
- Occupation – Higher risk jobs can lead to higher premiums
- Cover amount – The higher the pay out value of the policy is, the more it will cost for premiums
- Cover length – The longer you have cover in place, the higher your
If you’re looking to save money on life insurance, you should consider buying cover at the earliest stage. This is when premiums are typically at their lowest.
Types of life insurance
There are two main types of life insurance cover – whole life insurance and term life insurance. Both these cover types share a number of differences, yet can also provide support for your loved ones.
Whole life insurance
Whole life insurance protects you for the rest of your life, providing permanent cover. When you die, your family receives a cash lump sum payment. The policy pays out regardless of when you die, guaranteeing your loved ones a pay out.
There are two types of whole life insurance:
- Standard cover – Both the policy pay out and premium cost is fixed throughout the policy.
- Maximum cover – Your policy is linked to an investment fund. Your insurer pays into each month with the money from your monthly premiums.
Premiums for whole life insurance are generally more expensive than term life insurance. However, your family has peace of mind knowing that they are guaranteed a pay out.
Term life insurance
Unlike whole life cover, term life insurance protects you for a set period of time, rather than permanently. The policy pays out a lump sum to your family, so long as you die within the policy term.
There are three types of term life insurance cover:
- Level – Both the cost of your premiums and pay out value are fixed throughout the policy term.
- Decreasing – Designed to cover a mortgage and other large payments that your family would struggle to repay alone. The payout value decreases over time as you make repayments.
- Increasing – The pay out amount of your policy increases over time to protect the eventual amount from inflation.
Although term life insurance is cheaper than whole life insurance, it only provides temporary cover as opposed to permanent. There are also additional policies you buy as an add-on to a life insurance policy, such as critical illness cover.
Another form of cover is joint life insurance. A popular choice with couples, joint policies provide cover for two people under a single policy. It can often work out cheaper than buying separate policies for you and your spouse. You should consider buying joint cover if you and your spouse both have responsibility for your household’s income.
Buying cover online
Taking out a life insurance policy can be an easy process. But before you apply for a quote, you need to be aware of how much cover you need. Ultimately, the amount of cover you take out should reflect your monthly income. Buying too little cover can lead to extra costs later down the line, so it’s important to take out the right amount.
You can apply for a quote either online, over the phone or in person. However, applying online is usually the quickest and most straightforward. When applying for a quote, your insurer will ask you some questions about your age, health, lifestyle, as well as the type of policy you would like to buy. They will give you an estimate as to how much your monthly premiums will cost.
You may also be asked to undertake a medical exam to ensure you are free from any conditions or illnesses. Once you have been accepted, it’s up to you to keep paying premiums to remain covered.
Some providers also have a waiting period – this is a period of time you must wait before your policy comes into effect. If you’re ready to purchase life insurance cover, head online and get a quote today.
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