Life insurance is divided into two principal policy types, term insurance and whole of life insurance.
Term life insurance is commonly the most affordable kind of policy and will pay up a fixed amount of money in the event you pass away within a preset timeframe. If you do not die within the term then no settlement is paid out when the term finishes.
Whole of Life or investment insurance insures you for your whole life rather than a set time period and pays out on your death. Whole of life insurance is similar to any other financial investment tool and can be made up of bonds, endowments or other investments that are designed to grow over time. The sum paid on your death is based on how effectively the investment has performed.
With both kinds of insurance policy you pay a monthly or yearly premium. The premium may be fixed or variable again depending on the kind of insurance you decide on.
You can also purchase life insurance to insure outstanding mortgages or loans in case you die before they are repaid. This is equivalent to term life insurance except the amount of cover reduces over the duration of the term to equal the unpaid amount of the mortgage or loan that is insured. If you survive the term no pay out is made.
Finding Inexpensive Life Insurance
Because term life insurance is simple and covers you for a predetermined term and pays out a fixed amount it is usually better to choose the lowest priced premium you can get. Whole of life or other investment type life insurance policies will have stipulations included that might exclude settlement under certain circumstances for example death associated with pre-existing medical conditions. Check with an independent insurance advisor to ensure you obtain the right policy at the best price.
If you are more than 50 years old some insurance providers offer special life policies without the requirement for medical exams though the premiums will be increased to reflect the extra risk.
In all but the most simple instances it is better to check with an independent financial advisor before buying a life insurance policy. Make sure the advisor you decide on is licensed by the Financial Services Authority (FSA). FSA licensed insurance advisors are compelled by law to offer you easy to understand paperwork to ensure you are fully informed of the terms of the policy and any exclusions prior to buying.
For simple term insurance is generally acceptable to try a comparison service to find the cheapest quote. Since the term and premium is fixed and the condition for pay out is your death it becomes an easy case of cheapest is best. However if your needs or circumstances are more complicated it is better to speak to an unbiased expert.
This article is for informational purposes only. You should seek advice from a qualified and authorised insurance advisor before buying any financial services or products.