What type of life insurance policy do I need?
Published 27 October 2016
You're going to need to choose the right policy to protect your loved ones.
There might be a number of reasons why you're considering taking out life insurance – you might have moved into a new home or maybe you’ve had your first child. No matter what's motivating you, you're going to want to make sure you get the right life insurance policy for you.
This is going to include thinking about the level of cover you need, and the type of policy that's appropriate for your situation. To help you make this decision, we're going to take you through the different types of life insurance available.
Choosing the right one
You can choose from a few different types of life insurance. Below are just a couple of options.
Level term insurance - a policy that lasts for a certain number of years, and pays out a set amount if you die during the term. The amount you're covered for stays the same throughout the term, as do the premiums you pay in most cases. This type of policy can make sense if you need a certain amount of cover for a set period – for example, if you need to cover an interest-only mortgage.
Decreasing term insurance (or mortgage protection) – the policy lasts for a pre-agreed amount of time but the amount you're covered for decreases over the term. This cover is often suitable for covering a debt that's reducing over time like a repayment mortgage. It can be a cheaper option as a result.
Family income benefit insurance – this is a type of decreasing term insurance. It will pay out a regular income to your dependents instead of a lump sum, until the policy expires.
Whole-of-life insurance – your policy will cover you for the rest of your life, meaning your dependents will get a guaranteed pay-out when you die. It can be used to cover a funeral or reduce your inheritance tax bill.
Joint life insurance – a joint life policy will cover two people. So when one person dies, the money is paid out and the policy term finishes. You can choose whether joint policy pays out on the first or second death. It can often work our more affordable than two separate single policies.