It really gives you some mental peace to know that your loved ones will not have to deal with financial problems if you’re no longer there to offer any support. Accidents can happen, and that is why it is a good idea to take out an insurance policy when you can. The problem is that life insurance can be of different types, and choosing the right life cover is important. Here is a bit about some of the most popular types of insurance covers to help you make a sensible choice.
Whole Life Insurance
It is one of the most commonly used life insurance covers and it ensures that your dependents will get paid no matter when you die. You may want to opt for this type of insurance if you need some security to only pay off your mortgage – you can take it for 25 years if that is when your mortgage payments end. As you can see, these policies are guaranteed to pay out, and that is the reason why they often come at a higher cost. If budget is the main concern, you may want to opt for another type of life insurance.
Term Life Insurance
Unlike whole life insurance where your dependants get paid even if you don’t die after a specified period, term life insurance is for a specific time period only and pays off only if die within that period.
You may want to take out one such policy if you have young kids and you want some security for them to deal with housing costs in case the worst happens. Because you will be limiting the life insurance policy term, your premiums will be on the lower side. Sometimes, the policy is also called “level-term insurance”, which means that the payout will not change irrespective of when the buyer dies during the term.
Joint Life Insurance
As the name implies, the policy is shared by two individuals. If you’re a couple, you can decide to take a single policy for both of you instead of taking one for each. Doing this would be a cheaper proposition and the policy pays out if anyone of you dies during the term. Something you should bear in mind is that these policies will pay only on the first death and ends after that.
Some companies have a policy to offer a lump-sum payment in case an employee dies. Importantly, death doesn’t need to be at the workplace.
Moreover, sometimes a company starts pension schemes and also offers the same benefits to their members. However, you should also know that in most cases, your death-in-service payment is usually no greater than 3-4 years’ salary, which means it may not be enough to meet your family needs.
Other than these, there are some other types of life covers as well, so it really makes sense to do your research, educate yourself about different insurance products, and then decide on what will suit you the most.