What is term insurance?
Term insurance is the most common type of life insurance and pays out only if you die within the term. For example, you might take out a 25-year policy so your family could claim if you were to die within 25 years.
How much life insurance do I need?
The amount of cover, known as the sum insured, depends largely on your personal circumstances. For example, if you have a big mortgage and a large family, you will need more cover than someone who has a small home loan and one child.
A sum assured that is enough to cover the mortgage outstanding, plus car loan, any credit card debts, loss of income, cost of further education, and maybe even the cost of childcare, though you should carry out more detailed calculations to make sure you are properly covered.
How do I decide the length of the term?
It's really up to you. You might want to make sure the life policy lasts as long as your mortgage. Or maybe you would prefer to link the term to the age of your children so that it does not expire until they reach 18, or perhaps when they have finished university. Your own age will also have an impact on your decision.
How much does life insurance cost?
Premiums vary according to the type of policy and the size of the sum insured. Insurers also take into account the risk of a claim when setting premiums. So, life insurance is more expensive for older people.
Insurers even look at your postcode as people in some areas of the country are statistically more likely to claim.
Everyone with dependants and debts to pay needs life insurance to protect their family financially if they die.
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