Life insurance is a way of helping your loved ones if you’re no longer around.
It works just like any other insurance policy.
You simply pay a premium each month and if the worst happens, and there’s a valid claim, your policy kicks in.
And your family or dependents are given financial support to help cover anything from the monthly bills to clearing any debts you might leave behind or even helping to pay off your mortgage.
There are two main types of life insurance.
The first is called ‘term life insurance’ and this runs for a fixed period of time – known as the ‘term’.
For example, it could be 5, 10 or even 25 years.
The way it works is if you were to die during this term, the policy would pay out, as long as you’ve kept up your monthly payments and make a valid claim.
Or, if you don’t die, it would simply come to an end with no cash value.
The second type of life insurance is known as ‘whole of life policy’ which pays out no matter when you die, so long as you’ve kept up your monthly payments and make a valid claim.
This is generally more expensive than term life insurance though.
However, you may find life insurance costs less each month than you think and it’s worth bearing in mind that it’s usually cheaper to take out a policy when you’re younger than start one later in life when the monthly premiums are likely to be higher.
Then the next thing to think about is how much cover you actually need.
In other words, how much money would help your loved ones if you were to die.
To help work this out, start by totting up any outstanding debts or bills they’d be left with.
In that figure, include any big debts like a mortgage, plus monthly outgoings and other costs that might come up in the future, like university fees.
It’s worth getting financial advice from a professional if you’re unsure about anything.
Then, when you’re done, you can sit back and relax knowing you’ve put some plans in place.