Life insurance how does it work?

Life insurance how does it work is a question that you should research before seeking out the alternatives available to you.

Taking out life insurance is a relatively easy process but there are aspects that need to be handled carefully if you are to get the policy you want at a reasonable price.

What is the basis of life insurance?

Life insurance is a policy that is designed to protect you and your family in the case of your death. If you die while the policy is in force your family should receive a pay-out that should replace your income and pay some of your other major expenses.

It’s all about protecting your family whether the policy is for you or a joint policy to cover both you and your partner.

How many types of Life Insurance are there?

Life Insurance is offered by a wide range of insurers but there are several main types that you will be presented with.

• Term Life Insurance
• Whole of Life Insurance
• Level term Life Insurance
• Decreasing term Life Insurance
• Increasing Term Life Insurance

Let’s have a look at some of these policies in a bit more detail.

What is Term Life Insurance all about?

With Term Life Insurance you usually choose the length of the term. You might choose a long period like 25 years or longer, but this will depend on your circumstances.

If you are taking the policy out to cover a potential mortgage repayment, then the term of the mortgage may determine the length of the life insurance.  Alternatively, your mortgage lender may make it a lending condition that you take out life insurance for a specific amount and a specific period.

I also suggest that you consider reading our other detailed article about life insurance and mortgage. Click on link below if you are interested in a more detailed look at this issue.

Life Insurance for mortgage protection

Whole of Life Insurance

These policies cover you for the whole of your life and do not have a fixed term. The premiums are likely to be higher because the term length is unknown.

Level Term and Decreasing Term Life Insurance

With level terms the amount of pay-out is fixed when the policy is taken out. The policy will run for the term of the policy and will pay out if the policy holder dies while the policy is in force.

In contrast Reducing Term insurance, the amount paid out reduces over time along with the reduction in the premiums. This type of policy is usually associated with mortgage repayments where your mortgage liability reduces as you make mortgage repayments.

Increasing Term Life Insurance

The policies are sometime called index-linked policies. The policy is designed to deal with the impact of inflation on your policy. As a result, your premiums and potential benefit will increase over time.

 How much does life insurance cost?

The cost of a policy will vary a lot depending on the type of policy and a range of factors which will include:

• Yor age
• Your lifestyle (including smoking , alcohol consumption, exercise routine)
• Your health, especially pre-existing conditions
• Your job
• Your gender
• Level of cover

You will have to fill in a questionnaire and answer questions about the above.

In some cases, you may need a medical examination.

Get help with life insurance

I hope that we have answered the question, life insurance how does it work at least in outline above.

If you want more advice or help, please get in touch with us at My Life Insurance and we will help.