Life Insurance Defined
What is life insurance?
Life insurance is really what it says on the can. It's an insurance policy you can take out to protect you in the event of death. You're not personally going to benefit from it, but your beneficiaries will. What you need to remember about life insurance is that there are so many different types, and it's important that you speak to an adviser to make sure the life insurance you're buying is exactly what you need it to do.
What does life insurance cover?
It covers your life, so upon the event of your death the policy would pay out. However, it is subject to certain conditions within the policy. It can't be suicide, it can't be an act of war, an act of terrorism, or something that you've effected to make that event actually happen. So, other than that, it will pay out.
Why do you need life insurance?
You need life insurance to make sure that if anything did happen to you, the people you leave behind aren't in any financial difficulty. They can pay off any debts that you have accrued, they can pay off any mortgages that you might have, and they can continue to have a quality life that they had while you were surviving.
Where can I get life insurance?
You can get life insurance from lots of different places. You can get it from your bank or your building society. Direct on the Internet you can find your own product, or you can go to a financial advisor and they'll be able to find a product for you.
What happens to the money I pay into my policy?
That money will go into the insurer and that's where it will stay. That money will go into the pot for when people need the claim.
How do the life insurance companies benefit?
The way that insurers benefit by customers taking life insurance is by investing some of the money into investment funds where they'll make some profit. But not everybody's going to claim, so when the premiums are paid, a percentage of that will go back out to customers who make a claim but a percentage of that will stay with the insurers. What insurers will do is they'll use that money to invest, and they'll make money from that.
What will make me a greater risk to insurers?
What will make you a greater risk to a life insurer is anything that's going to mean you're going to claim on that policy and make you a greater risk. At greater risk are people with medical history, hazardous occupation - maybe you're in the army or you're a fireman - you've got medical family history there, if you smoke, if you're very underweight, or if you're very overweight. Anything that's likely to make a claim. The best thing is if you're good health, low-risk occupation, you're going to benefit from the lower premiums.
How many life insurance quotes should I get?
How many quotes you should get really depends on what it is that you're looking for. What I'd always recommend is that you actually go and seek advice and somebody will spend time talking to you about your circumstances, your priorities, your family circumstances, and they will then go away and recommend a suitable solution for you.
What are the other terms used to describe life insurance?
Life insurance is also known as life insurance, life assurance, death cover and that's really about it.
How do you calculate the amount of insurance that you need?
As a minimum you should always be looking to cover your biggest debt, which is usually your mortgage. Always make sure you have enough there to pay that off. In terms of any extra, as a minimum I would always recommend you have about three times your income, but you do need to seek advice from a specialist who will be able to look up how much coverage you do exactly need. There is no rule of thumb, it's really how much you can afford. You do need to remember life insurance cannot create wealth. You cannot insure yourself for 3 million pounds, for example, if you are not actually worth that amount of money.
Do insurance companies make a lot of money?
They will make money and they will make profit, but a lot of that will go into innovating products, in particularly underwriting, which basically means that they put money into their processes to make their process far quicker for customers, improve the turnaround times that customers get cover quicker. They're going to make money, they're a business, but they are known in the financial industry for investing a lot of that money back into making it a better service for customers all around.
