What are the different types of life insurance?

3 June2011

As far as protecting your family's financial security goes, there are few things more important than a good life insurance policy. In the event that you pass away early, life insurance should provide your family with a payout that helps them to maintain their standard of living.

Nobody likes thinking about that scenario - but it can be reassuring to know that if the worst does happen, they'll be covered.

There are actually a few different types of life insurance, but they can all be broadly arranged into two categories: term life insurance and whole-of-life insurance.

Term life insurance

Term life insurance only lasts for a fixed period of time. If you pass away during the time in which your policy is valid, your family will receive a payout. After the policy has expired, however, they won't be eligible for any payment (unless you arrange a new policy).

Whole-of-life insurance

Whole-of-life insurance policies cover you for the rest of your life. You will normally keep making payments for as long as you want to be covered, although some policies will stop charging after a certain date.

Whole-of-life insurance is relatively expensive because it is more or less guaranteed to pay out, but it does at least mean you're covered for the rest of your life.

Other things you might want to consider Life insurance is there to help your family if the worst happens, but what about protecting your family while you're still alive? Things like critical illness cover and mortgage payment protection insurance could also help you through a difficult patch.

Of course, there are countless different types of insurance available, and it would be impossible, and often inappropriate, to insure every aspect of your life. The key is to look at your circumstances and see where you need insurance the most. Do you have a lot of gadgets? Then gadget insurance might be an idea. Have you paid a lot in vet bills over the last few years? Maybe pet insurance could help.

Of course, some types of insurance are more important than others - and life insurance may well be one of the most important.

For more information on the various types of insurance available, click here.

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