Life and Critical Illness Cover for Families
Life Insurance pays out a lump sum to your loved ones in the event of your death. Essentially, it’s an insurance for your family aimed at providing with them vital financial support at a very difficult time.
The cash can be used for any number of reasons, although typically families use Life Insurance to pay off a mortgage debt. This way, they don’t have to worry about losing the family home on top of the distress of losing you.
Decreasing Term Life Insurance is often used for this purpose, as the benefit the policy will pay out falls over time in line with your mortgage.
Of course, the money can also be put to other uses, from maintaining their standard of living to paying for your funeral or covering school or university tuition.
Where the policy is to be used to provide some kind of family protection in this manner, the alternative to Decreasing Life Insurance is Level Life Insurance, where the benefit stays fixed over the life of the policy.
This is useful if you want insurance for your family that will leave a cash lump sum in later years on top of repaying your mortgage, or if you’ve taken out an interest-only mortgage and will have to repay the principal capital you borrowed at the end of the loan term.
Decreasing Term Life Insurance is cheaper than Level Life Insurance because as you get older and the the risk of you claiming rises, the amount the insurer will pay out is falling in line with your mortgage.
Should Couples Get Joint Life Insurance?
Joint Life Insurance is available for couples, where two people are written on the same policy. While this is cheaper than having two separate Life Insurance policies (one for each half of the couple) it does have its drawbacks.
Joint Life Insurance will only ever pay out once – usually on the death of the first partner. This means that the cover ceases for the surviving partner after the first person’s death.
It may be far harder and more expensive for the surviving partner to then find Life Insurance as a single individual if they’re older and in poorer health than when they took out the Joint Life policy.
Should the worst happen and both halves of the couple tragically die at the same time, a single payout from a Life Insurance policy may not be sufficient for any surviving family.
While one payout may be enough to pay off the mortgage, dependent children may then not have any cash to live on.
As a result, many couples opt for two single Life Insurance policies to protect their families, one for each person. This generally only costs a few extra pounds per month – with the payout potentially doubled (once for each individual).
Adding Critical Illness Cover to Life Insurance
Most Life Insurance policies offer the choice to add Critical Illness Cover. This will trigger a payout not just on death but also if you’re diagnosed with an insurer-specified serious or ‘critical’ illness, with the big three claims being due to cancer, heart attacks and strokes.
Critical Illness Cover insures your family not just for the risk of death but also the risk of becoming seriously ill.
As you have a far higher risk of developing a critical illness than you do of dying, adding Critical Illness Cover to your Life Insurance will increase the premium. However, it offers an additional layer of cover and peace of mind.