Do you need life insurance?
If you are in the process of buying a home, then you should think about life insurance; whether you need it or not.
What is life insurance?
Life insurance is similar to an agreement between the insurance provider and you. The general concept is that the insurance provider agrees to pay up a chosen amount in the case of death of the policyholder within a specified period. The policyholder has to pay premiums.
What are the types of life insurances?
Term life insurance
A term life insurance is a promise by the insurance provider pay up a chosen sum if your death occurs within a specified period.
Whole of life insurance policy
Whole of life insurance policy promises to pay up a chosen sum regardless of when your death occurs. These types of life insurance policies are more expensive as compared to term life insurance policies, which are the more popular choice.
Why could you need life insurance?
Any person between the ages of 18 and 90 can take out life insurance. Most people take out life insurance when they buy a home using a mortgage. You will find that your estate agent or mortgage broker may be offering life insurance. However, you can also buy it from insurance providers directly.
The main types of term life insurance policies
- Level term policy – If you take out a level term policy, you will be covered for, and the amount of premiums you will be paying will remain the same throughout the term of the policy.
- Decreasing policy – The payouts will start to decrease as time progresses. Your mortgage repayments should decrease over time. However, in case you need to borrow more money, and your life insurance does not cover the loan, you can apply for a new policy which covers the amount or take out another policy to cover the difference.
- Increasing policy – the amount which you are covered for will increase over time, to keep up with inflation.
- Guaranteed premium – Your monthly premium stays the same through the term of the policy.
- Reviewable premium – Your monthly premiums are reviewed after a certain point during the term. Your monthly payment could go up, and life insurance premiums usually go up with age.
What to watch out for?
- Shop around for the best deal – If your estate agent or mortgage broker is offering a life insurance policy, you should get a quote from them, but never accept their deals until you have surveyed the market.
- Cancellation fee – You may find that some policies have a cancellation fee or a tie in period and you want to avoid both.
Please note that the information provided on this page:
- Does not provide a complete or authoritative statement of the law;
- Does not constitute legal advice by Net Lawman;
- Does not create a contractual relationship;
- Does not form part of any other advice, whether paid or free.
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