Your Crucial Guide to Life Insurance – and Why You Really Need it

We’ve all heard of life insurance, but not many of us are really aware of the different kinds of life insurance – and the benefits they bring. If you want your loved ones to be protected in case of an unforeseen circumstance which results in your passing, you should consider taking out a life insurance policy. But what do you need to know about life insurance? Here’s your crucial guide to life insurance – and why you really need it.

The basic purpose

Life insurance has one basic purpose – to provide your dependents with money (which comes in either a lump amount or as regular installments) in case of your death. Life insurance is specifically designed to give you the reassurance that your family will be provided for if you are no longer there.

The amount paid for life insurance will depend on the insurance cover. You will decide how the money will be paid out, and you will decide whether you want your insurance to cover particular payments as well, such as rent or mortgage.

The two major kinds of life insurance

There are two major kinds of life insurance: term life and whole of life. A term life policy will run for a certain fixed period (referred to as the term), and this can extend from 5 years to 10 or more. This type of policy will pay out only if you pass away during the term. A ‘whole of life’ policy is life insurance which will provide your dependents with a payout regardless of when you pass away, provided you settle the premium payments.

Life insurance coverage

A life insurance and protection policy will only cover a person’s death; if a policyholder cannot take care of their dependents due to disability or illness, they will not receive coverage. You should know, however, that some insurance policies can give you a terminal benefit (which will allow your dependents to receive money in case you have a medical diagnosis which is terminal), but this often has to be requested.

Bear in mind that most life insurance policies will have certain exclusions, such as death due to alcohol or drug abuse. Also, if you take out a policy whilst knowing that you have a serious illness, the insurance may not cover a cause of death associated with your serious illness.

Do you need it?

You could certainly benefit from life insurance if you have dependents, especially young children, and if you have a partner who is dependent upon your income. You may also benefit from life insurance if you are paying off a mortgage on a home so that the mortgage payments will continue even after you pass away.

The benefits of life insurance are tremendous, especially when it comes to the financial security and stability of your family and the people you love.