What Type of Protection Do I Really Need?

By Vicki Coleman

Taking out life insurance would be a heck of a lot easier if someone could just tell you exactly what cover you need.

Well, as luck would have it, we have experts just on the other side of the phone to understand your individual needs and set out the options.

But it’s a good idea to come into the conversation with a vague idea of the type of protection you need, so that when the options are presented to you, you can be nice and decisive.

Do you even need life insurance?

Maybe not. If you’re single and don’t have any dependents, you probably don’t need to think about insuring your life.

That’s not to say your life is worth any less, of course, just that nobody is financially dependent on your income other than yourself.

Similarly, if you’re on a low income, the cost of life insurance premiums may outweigh the benefits.

Life insurance cover becomes valuable protection when you have:

  • dependents such as children
  • a partner who relies on your income, or
  • a family living in a house with a mortgage

With adequate life insurance in place, in the event of your death, the people nearest and dearest to you will receive financial support in your absence, either as a lump sum or as regular payments.

When should you start thinking about life insurance?

Most people start to consider taking out a life insurance policy when they either take out a mortgage on a property or have children.

These are major life events and when most of us feel like we’re properly ‘adulting’. When you start thinking about life insurance – and your mortality – you know you’re a fully-fledged grown up.

When you become a parent and/or a homeowner, you have newfound responsibilities, you can learn more about life insurance at key events in your life in this article.

Getting by financially as a couple or a family can be a challenge at the best of times – but if your salary was to be taken away in the cruellest of fashion, it could make life extremely difficult for those who are left behind.

With the right life insurance cover in place, you don’t need to consider the prospect of your partner or offspring being left in the lurch financially.

Our article What is Over 50s Life Insurance? explores the protection options available if you're over the age of 50.

Having quashed those thoughts, you can get on with living your best life.

Term life or whole of life insurance – which type of policy is right for you?

When you speak to an expert, you’ll be presented with the choice of either a term life or a whole life insurance policy.

However, you don’t need to be an expert to work out the difference between the two.

A term life insurance policy will run for a fixed period of time such as five, ten or 25 years. They only pay out if you die during the policy.

A whole life insurance policy will cover you for the duration of your stay on this planet.

But what’s the right option for you?

Term insurance

There are three kinds of term life policies:

  1. Level – nice and simple: if the policy is triggered during the period of cover, it will pay out as an agreed lump sum.
  2. Decreasing – the level of cover reduces each year. It’s designed to match repayment mortgages, where the outstanding loan decreases over time.
  3. Increasing – the level of cover rises over the duration of the policy, in line with inflation.

One of our experts will be happy to take you through the pros and cons of each. For example, if simply covering the mortgage isn’t going to be enough to support your dependents in the event of your death, decreasing term insurance might not offer all the protection that you need.

You can read more about single vs joint life insurance here.

Whole of life insurance

If you don’t like the idea of only having part of your life covered, you can take out unlimited cover.

Whole life insurance has three clear benefits:

  1. Premiums remain fixed – whilst these are likely to be higher compared to a term insurance policy, you can learn to budget for them.
  2. Tax exemption – the payout can be exempt from inheritance tax if it is written into a trust, which means more money to your dependents.
  3. Guaranteed pay-out – your beneficiaries won’t need to worry about any small print, as your policy will pay out no matter when you die, providing you’ve kept up with your premium payments.

With lifetime mortgages becoming the standard among homeowners, whole life insurance is also increasing in popularity.

Are you protected by death in service?

When your employer hired you, they might have mentioned a benefit called death in service. There’s a good chance that it would’ve been glazed over, however, as death isn’t exactly the first thing you think about when celebrating a new job.

In short, it’s an employer’s promise that they will pay a lump sum should you die while on their payroll. The amount a nominated beneficiary would be paid will likely be stated somewhere in your contract, but it’s usually between three to five times your current salary.

So, having done a bit of quick math with your current salary, you can work out how much your family would get.

However, it’s important to note that this perk will end once you leave the company, whereas life insurance will cover you for the length of the policy.

You also have more control with a life insurance policy – you choose the length of the cover and how much your beneficiaries receive.

If you’re covered by death in service, you can still take out a life insurance policy. It just means that you’ll be doubly protected – which means more money for your loved ones if you die.

Can you get multiple quotes?

As important as it is to get the right level of protection that you need, it often comes down to the numbers.

At QuoteSearch, we’re happy to get as many quotes that you need so that you can make your mind up. We don’t have any favourite suppliers – the quotes that you see are comprehensive and competitive.

So, don’t be shy in requesting quotes for different types of cover – that’s what our experts are paid to do!

If you're not sure if life insurance is for you, we've also covered the top 3 alternatives to life insurance.

To compare your free life insurance quotes from leading providers, click here.