Life insurance provides financial support to your dependants in the event of your death. The pay-out from the policy can be used to clear debts, such as the mortgage, credit card balance or personal loans, and to cover ongoing household expenses. The two main types of life insurance cover are term insurance and whole of life insurance.
Life insurance is a vital part of financial planning for anyone who has dependants. By ‘dependants’, we mean anyone whose circumstances and material wellbeing would be affected by your death – for example, your partner, your children or anyone else who is financially reliant on you. Thinking about your death and its inevitable impact on your family’s circumstances is difficult – and many people simply shy away from the topic. But not doing anything could put loved ones at financial risk. That’s why it’s important to confront the issue and take out life insurance.
In most cases, the most effective form of life insurance is called ‘term’ insurance. This type of policy pays out an agreed amount – the ‘sum insured’ – either as a lump sum or as a regular income, if you die within a specified period – known as the ‘term’. You choose the size of the pay-out and the length of the term. For example, you may decide to have cover in place until your children are grown up and have left home.
Life insurance policies can start from just £5 a month. However, the cost will vary depending on factors such as your age, health, occupation, whether you smoke, length of the term and whether you choose add-ons such as critical illness cover. Supacompare.co.uk found that smokers on average pay £18 more a month for life insurance compared to non-smokers. And adding critical illness cover, which pays out on the diagnosis of one of a list of serious medical conditions, typically increases your payments by almost £28 per month.
As a rule of thumb, the earlier you take out life insurance, the cheaper your policy will be. If you’re in your 20s life insurance is unlikely to be a priority. But Supacompare.co.uk research shows that taking out a policy in your 20s can be as much as two times cheaper than taking out cover in your 40s. The reason for this is simple - insurers consider you less likely to make a claim the younger you are. The chart below shows the average monthly premium for life insurance depending on the age of the policyholder. But keep in mind each insurer will differ in how much emphasis they give to factors such as your occupation, medical history and lifestyle, so your personal quote is likely to be different. Whether you’re buying your first home, getting married or thinking about having children, taking out life insurance as a young adult can be a cost-effective way to plan for your financial future.
You can compare a wide range of life insurance policies on our comparison tables. And if you take out life cover through Supacompare.co.uk, you will receive a £50 voucher from Amazon Your voucher of choice is redeemable within 40 days of your third life insurance payment. T&Cs apply. You can find out more by pressing here.
Our extensive range of guides, listed on the left, will tell you all you need to know about how life insurance works.
Life insurers pay us every time someone buys life insurance through Supacompare.co.uk.
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