Types of Life Insurance

When it comes to protecting your loved ones and ensuring their financial security, there are multiple types of life insurance options available to suit different needs and circumstances. While traditional policies like level term life insurance are well-known, there are alternative types of life insurance that might better align with your unique requirements.

In this guide, we explore 4 popular life insurance types: level term life Insurance, decreasing life insurance, over 50s life insurance and family income benefit (FIB).

Level Term Life Insurance

Overview

Level term life insurance is a straightforward type of policy that provides a fixed payout if the policyholder dies within a specified term. The term can range from 10 - 30 years or more, and the payout - also known as the sum assured - remains constant throughout the term.

Key Features

• Fixed payout: the payout amount is predetermined and does not change
• Fixed premiums: premiums remain the same throughout the policy term
• Specified term: coverage is provided for a fixed period. If the policyholder survives the term, the policy does not pay out, and premiums are not refunded

Who Is It Ideal for?

• Individuals looking for a predictable and straightforward policy
• People with financial dependents who would need a lump sum to cover significant expenses like a mortgage, education costs, or other debts

Decreasing Life Insurance (Mortgage Protection)

Decreasing life insurance (also known as mortgage protection insurance) is a type of policy that specifically covers your mortgage. If you die during the policy period, the insurance payout will take the form of a lump sum that can be used by your family to clear the mortgage so they can keep the house.

Key Features

• Typically cheaper that level term: this is because your mortgage decreases over time so the amount that needs to be paid off will also decrease over time, resulting in lower premiums from the outset
• Has a slight buffer: the rate as which the policy payout reduces is slower than the rate at which your mortgage reduces, providing a bit of a financial buffer

Who Is It Ideal for?

• Individuals with a mortgage
• Individuals perhaps with no dependents for whom the mortgage is their main consideration

Over 50s Life Insurance

Overview

Over 50s life insurance is designed specifically for individuals over the age of 50. This policy guarantees acceptance without any medical examinations or health questions, making it accessible to those who might struggle to get other types of life insurance.

Key Features

• Guaranteed acceptance: no medical checks are required, ensuring coverage regardless of health conditions
• Fixed premiums: premiums are usually fixed, but they can be higher than other types of life insurance due to the guaranteed acceptance
• Fixed payout: provides a lump sum payout on death, which can be used for funeral expenses, debts, or leaving a legacy

Who Is It Ideal for?

• Individuals over 50 who want a straightforward policy with guaranteed acceptance
• Those looking to cover final expenses and leave a financial gift for their loved ones

Family Income Benefit (FIB)

Overview

Family Income Benefit (FIB) is a type of life insurance that provides a regular income to your beneficiaries instead of a lump sum. This income is paid monthly, quarterly, or annually for the remaining term of the policy after the policyholder's death.

Key Features

• Regular income: ensures a steady flow of income for your family, helping them manage day-to-day living expenses
• Flexible term: you can choose the length of the policy term to match your family's financial needs
• Affordability: often more affordable than level term life insurance for the same level of coverage

Who Is It Ideal for?

• Families who need to replace lost income and maintain their standard of living
• Parents with young children who want to ensure financial support until their children become financially independent

Choosing the right type of life insurance policy depends on your personal circumstances, financial goals, and the needs of your dependents.

Below we’ve listed some factors to consider.

1. Financial needs:
   • Assess whether your family would benefit more from a lump sum (level term life insurance) or regular income (family income benefit)
   • Consider any specific needs for covering funeral expenses or leaving a legacy (over 50s life insurance)
2. Health and age:
   • If you have health issues or are older, over 50s life insurance might be the best option due to its guaranteed acceptance
3. Affordability:
   • Compare the premiums and ensure they fit within your budget while providing adequate coverage
4. Policy term:
   • Align the policy term with your financial obligations, such as the duration of your mortgage or until your children become financially independent

Understanding the alternative types of life cover can help you make an informed decision that ensures your family’s financial security. Whether you opt for the predictable benefits of level term life Insurance, the steady support of family income benefit, or the guaranteed acceptance of over 50s life insurance, each type offers unique advantages tailored to different needs. Take the time to assess your circumstances, compare options and consult with a financial advisor to choose the policy that best protects your loved ones.

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