Who needs life insurance cover?

If you are single and have no family or dependents, life insurance cover is something you may probably put to the bottom of your list of financial needs. Conversely, anyone with any dependents and especially someone with a family is likely to have such cover right at the top of essential safeguards for his or her loved ones. Life insurance cover, for example, could help to ensure not only that your children get to finish their education but that other surviving dependents are also financially protected.

Life insurance cover is one of those relative rarities in the world of insurance it is simple, straight forward, and can be keenly priced. Indeed, life insurance must be one of those very few things in this world of constantly escalating prices, where the cost of the premiums has actually reduced in the past decade or so*.

The reasons for the attractive pricing are largely the result of a huge growth in the variety of life insurance policies available and the extremely keen competition in the market place. A common form of life insurance is level term insurance. Under such an agreement, the insurer agrees to pay the same (i.e. level), assured lump sum benefit if the policy holder should die during an agreed period of time (the term).

The length of the term is at the discretion of the policy holder and might be chosen to coincide with retirement age if the insurance is being used to protect a spouse or until the completion of full-time education, for example, if children are involved. Naturally, the shorter the term, the lower the risk assumed by the insurer and, therefore, the cheaper the premiums will be.

In an equally straight forward way, the greater the degree of protection, or the bigger the lump-sum payment, the more expensive will the premiums be. The aim, generally speaking, is to ensure that dependents are not saddled with the debts of the deceased, so life insurance cover is intended to pay off any outstanding debts and to provide surviving family members with a reasonable standard of living.

Of course, certain things will increase the risk of the insured dying within the term of the life insurance cover. If the person seeking insurance is already fairly well advanced in years, have a poor state of health, smoke, and are engaged in a high-risk occupation or indulge in hazardous sports, they could expect to pay a considerably higher premium than the person who falls into none of these categories.

In addition to level term life insurance, there is also decreasing term life insurance, which, as the name suggests, reduces the level of benefits payable with each succeeding year of the term and is therefore a useful way of covering a repayment mortgage, where the amount of mortgage debt outstanding also decreases on a year-by-year basis.

For those wanting to ensure that the benefits payable will also reflect the changing rates of inflation there are also increasing term and index-linked forms of term insurance.

Given the variations in life insurance cover available, there is almost certainly likely to be one to suit anyone’s needs and circumstances.

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