What Type of Life Insurance is Best?

Find out which type of life insurance is right for you.

The type of life insurance that’s best for you depends entirely on your personal situation and specific needs. Whether you’re the household breadwinner or a stay-at-home parent, there’s a life insurance policy for you.

From life insurance policies for restrictive budgets to critical illness and income protection insurance, this guide aims to take you through everything you need to know to make an informed decision. Scroll on to learn which option is the best fit for your needs.

How does life insurance work?

Generally, life insurance policies will pay out a lump sum in the event of your death. This is awarded to your survivors and helps to support them financially while they’re grieving. It also helps to cover the cost of any outstanding debts that you leave behind.

Life insurance pay-outs are a safety net, especially in traumatising and unforeseen situations. They help with day to day living costs such as mortgage repayments and household expenses in general. Plus, they can leave an inheritance behind for your loved ones.

Life insurance is a very important investment. Which is why choosing the right policy for your needs is essential. There are many different life insurance options to choose from and the right fit for you will depend entirely on your personal circumstances.

Let’s take a closer look at some of the factors that you need to think about before making your decision.

What should I think about before choosing my life insurance policy?

When deciding which life insurance type is best for you, it’s important to consider the below first:

• What policy premiums can you afford to work into your monthly budget? Take an in-depth look at your budget as that will give you a good indication of which type of insurance is most affordable.

• Existing debts. Your mortgage and any other outstanding debts you may have will still need to be paid in the event of your death. With this in mind, it’s important to calculate any financial responsibilities you will have whatever life throws your way.

• Monthly outgoings. If utility bills and food shops are largely your responsibility in your household, you need to ensure you choose a life insurance policy that can cover these costs. Even if only for a little while. These are unavoidable expenditures for every household. And if your family relies on your income for these monthly costs, you’ll want to ensure they’re covered in every eventuality.

• Whether it’s your kids, your parents or a disabled dependent, if you have someone in your life that relies on you financially, this needs to be factored into your decision making process.

• Your family’s reliance on your income. How important is your income to your family? If you’re the breadwinner or are in an equal-earnings household and the loss of your income would be detrimental, investing in the right life insurance policy is definitely a smart move.

Different types of life insurance

With so many different life insurance options out there, choosing the best for you can be a tricky process. Let’s explore the different options to ensure you make the right decision for your needs.

For couples, especially ones with children, a joint life insurance policy is a great option. This type of policy awards a mutual financial stake to both participants. If one of you were to die during the agreed period of cover, a lump sum is paid out and the policy expires.

It’s also worth mentioning that this means the surviving person is no longer covered by the policy. This life insurance option is ideal for couples who will only need a single payout. It is also generally much more affordable as opposed to paying two individual life insurance premiums.

If you’re responsible for mortgage repayments, decreasing term life cover is a viable option. This type of life insurance policy generally has one of the lowest premiums too, so it’s great for tighter budgets. Decreasing-term life insurance ensures that any outstanding debts are covered in the event of your death providing the policy is still active.

Decreasing-term basically means that the amount paid out reduces as the outstanding balance of your financial commitments decreases. The main benefit of this type of policy is that your mortgage (and any other financial obligations) is not left to your survivors.

Level term life insurance policies pay out a fixed lump sum that remains the same throughout the duration of the policy. This provides a security blanket for people from all walks of life. So, whatever your current status, this is a great option to think about.

Level-term life insurance guarantees your beneficiaries will receive a specific sum should you die while the policy is active. This sum is agreed by yourself and your insurance provider at the time the policy is taken out.

Increasing Term Life Insurance

Increasing-term life insurance offers a lump sum payout that increases each and every year by a fixed amount. The yearly increases continue for the duration of the policy.

This type of life insurance generally is best for anyone wanting to protect their policy’s value. It helps your policy maintain its worth even as the cost of living rises.

Whole-of-life insurance policies provide the policy holder with life-long cover. It guarantees that your beneficiaries receive a payout when you die, whenever that may be.

This type of life insurance is best for anyone looking to leave loved ones an inheritance. But, one thing to be aware of with this type of policy is that if you purchase a whole-of-life insurance policy when you’re still young, you could actually end up paying more into the life insurance policy than it will inevitably pay out.

It’s also important to highlight that this type of insurance comes with the priciest premium.

Critical illness cover is very different to life insurance in when it pays out.

Firstly, it generally pays out a lump sum upon a viable claim while the policyholder is still alive. The policy then ends.

This can be vital as it usually covers the cost of living. Things like mortgage repayments, utility bills and even food shops should be taken care of with your critical illness policy.

Critical illness cover is often offered alongside life insurance as an add-on. It’s best for anyone whose income is detrimental to their family’s financial obligations.

Income protection is generally paid out on a monthly basis. Typically, the amount you’ll receive is around 70-75% of your income for the duration you’re unable to work. Income protection insurance offers you financial stability so that you can focus on getting your health back to its normal levels.

With accidents, injuries and debilitating illnesses always a possibility, income protection insurance provides peace of mind. It allows you to spend more time living and less time worrying about what’s round the corner.

Income protection insurance is also often offered as an add on to an existing life insurance policy and it’s best for anyone whose household is reliant on their income.

The cost of your life insurance premium is dictated by your personal circumstances along with the level of cover required. There are a number of factors that will impact the price of your life insurance policy. These include:

• As a general rule, the older you are the more expensive a life insurance policy is likely to be.

• Overall health. Your medical history will also impact your life insurance policy fees. If you have already been diagnosed with an underlying health issue, your policy is likely to be much pricier if available at all.

• Lifestyle in general. Whether you smoke or not, how much you drink on a weekly basis and how active a lifestyle you lead will all impact the overall cost of your income protection insurance policy.

Other things that will impact the cost of your life insurance policy include the length of the policy and the level of cover. The longer you want a policy to last will ultimately impact the price. As will the level of cover you require. Think about how much you want and need the policy to pay out.

At Life Expert, we deliver quotes from our panel of insurers. We’ll also help you to conduct a full comparison between the best life insurance options to suit your needs. All of our quotes are completely personalised. Plus, our experts are always on hand to help guide you through the entire purchasing process.