Life Insurance: Understanding The Basics Of Coverage

Life insurance is a type of policy that provides financial support to your loved ones in the event of your death. It can also be known as life cover or life assurance, and is designed to help your family cope financially when you pass away. Most life insurance policies pay out a cash sum to your dependants, which can be used to cover everyday money worries such as household bills, childcare costs or mortgage payments. There are several types of life insurance, including group life insurance, which covers a group of people, usually employees of a company, and individual life insurance, which is bought by a single person.

Life insurance vs assurance

Life insurance, also known as life cover or life assurance, is a type of policy that provides financial support to your loved ones in the event of your death. It helps minimise the financial impact on your family and offers peace of mind. Most life insurance policies pay out a cash sum to your beneficiaries, which can help with everyday money worries such as household bills, childcare costs, or mortgage payments.

When it comes to life insurance vs assurance, the terms are sometimes confused. In general, "insurance" refers to providing coverage for events that might happen, such as fire, theft, or flood. On the other hand, "assurance" is used for events that are certain to happen. In the context of life insurance, it refers to the certainty that the policy will pay out upon the insured person's death.

There are different types of life insurance policies available, such as individual and group life insurance. Individual life insurance is based on the insurability of a single person, while group life insurance covers a group of people, such as employees of a company or members of a union. You can choose the amount of cover, the duration of the policy, and whether you want joint or single coverage.

Life insurance is designed to provide financial support to your dependants, such as your children or partner. It can pay out a lump sum or regular payments, depending on the level of cover you choose. You can also decide how the money is paid out, whether it covers specific payments like a mortgage or rent, or if it's left as an inheritance.

Lump sum vs regular payments

Life insurance is a type of policy that protects your loved ones with financial support if you die. It can help minimise the financial impact that your death could have on your family and offer peace of mind to those you care about most.

Most life insurance policies are designed to pay out a cash sum to your loved ones if you die while covered by the policy. This can be paid out as a lump sum or as regular payments. The amount of money paid out depends on the level of cover you buy. You can decide how it’s paid out and whether it will cover specific payments, such as mortgage or rent, or if it’s to leave your family with an inheritance.

For example, if you choose to receive a lump sum, this could be used to pay off any outstanding debts or cover funeral expenses. On the other hand, if you choose to receive regular payments, this could provide a steady income for your family to cover their everyday living expenses, such as groceries or utility bills.

It's important to consider your family's financial needs when deciding between a lump sum and regular payments. A lump sum may be more suitable if you want to ensure that a large sum of money is available immediately after your death. Regular payments, on the other hand, can provide a consistent source of income over a longer period, which may be more beneficial if your family relies on your income to cover their ongoing expenses.

Critical illness cover

Life insurance is a type of policy that protects your loved ones with financial support if you die. It can help minimise the financial impact that your death could have on your family and offer peace of mind to those you care about most. It can help them deal with everyday money worries such as household bills, childcare costs or mortgage payments.

The cover typically pays out a lump sum, which can be used to cover medical costs, pay off debts, or provide financial security during your recovery. It can also be used to make necessary adaptations to your home or lifestyle, such as installing a wheelchair ramp or hiring a caregiver.

When considering critical illness cover, it is important to review the policy details carefully. Different policies may cover different illnesses, and some may have exclusions or limitations. It is also essential to understand the waiting period before a payout is made and any other conditions that may apply.

Group life insurance

Life insurance is a type of policy that protects your loved ones with financial support in the event of your death. It can help minimise the financial impact that your death could have on your family and offer peace of mind to those you care about most. It can help them deal with everyday money worries such as household bills, childcare costs or mortgage payments. The amount of money paid out depends on the level of cover you buy. You decide how it’s paid out and whether it will cover specific payments – such as mortgage or rent – or if it’s to leave your family with an inheritance.

Joint or single policies

Life insurance is a type of policy that provides financial support to your loved ones in the event of your death. It can help minimise the financial impact that your death could have on your family and offer peace of mind to those you care about. You can choose the amount of cover you need and how long you need it for, as well as whether you want joint or single life insurance policies.

Joint or single life insurance policies are an important consideration when purchasing life insurance. A joint life insurance policy covers two people, usually a couple, under one policy. The policy pays out a lump sum or regular payments to the surviving partner in the event of the death of one of the insured individuals. This can help the surviving partner cope with the financial burden of losing their spouse, including everyday expenses such as household bills, childcare costs, or mortgage payments. It can also provide an inheritance for the family.

On the other hand, a single life insurance policy covers only one person. It pays out a lump sum or regular payments to the insured person's beneficiaries, such as their children or other family members, in the event of their death. This can help ensure that the insured person's dependants are financially secure even after they are gone.

When deciding between a joint or single life insurance policy, it is important to consider the specific needs and circumstances of the individuals involved. For example, a couple with young children may opt for a joint policy to ensure that the surviving partner can continue to provide for the family. On the other hand, a single person with no dependants may choose a single policy to provide an inheritance for their parents or siblings.

It is also worth noting that joint life insurance policies typically end after the first claim is made, while single life insurance policies can continue to provide coverage for the insured person's beneficiaries even after the initial payout. Additionally, the cost of a joint policy may be lower than that of two separate single policies, but the level of coverage may also be lower. As such, it is important to carefully consider the specific terms and conditions of the policy before making a decision.

Frequently asked questions