Life Insurance – How to choose the right insurance policy
First of all, you should work in order to pay premiums on life.
Types of life insurances
Simple level term insurance:
- What it is: The policy is purchased for a specified number of years – the payment is if there is a death
- Advantages: simple and for all
- For whom: for most people who have requirements for life insurance and holding a mortage.
Decreasing term insurance (also known as mortgage protection policy):
- What it is: the policy lasts for a certain number of years as long as we have a mortgage. But, every year payment in case of death decreases as reducing our mortgage.
- For whom: for people with a mortgage.
Family income benefit insurance
- What is that in case of death, the insurance company pays a regular „salary” for a specified number of years. As a result, the family will retain continuity and financial stability.
- Who: Best for families where the breadwinner may die.
- What it is: The policy insures you for the whole of your life. Insurance will be paid no matter when you die.
- Disadvantages: more expensive policy
- For whom: For people with large estates, who fear that the inheritance will be lost because of tax that must be paid in the event of taking over the inheritance.
When you buy life insurance so-called whole-of-life policy
Best is buy quickly and protect yourself in case of death for this reason that over the years while putting off the decision to buy insurance policies its price will be higher and higher. By signing the agreement with the insurance company you guarantee yourself a fixed price for example for 5 or 10 years. So remember, the price of the policy bought at age 50 or 30 years will be different.
There are several types of policies so-called whole of life
- maximum cover – the monthly rate is variable and remember if you find a cheap insurance policy, take into account that its price may vary
- Balanced cover – insurance fee is a little higher and the payment of compensation will depend on the condition of the stock market.
- Guaranteed premiums – you pay a fixed monthly fee for the duration of the policy and you get a guaranteed fixed payment that is specified in the contract.
Pension term insurance
- How does it work: it works as usual insurance, but insurance policies bought before 2007 have some tax benefits.
- For whom: This insurance is no longer available for purchase, but those who bought before 2007 have benefits from it
Life insurance and mortgage
If you want to use life insurance to secure repayment of a housing loan you take out a policy for a certain number of years exactly as is your mortgage. In the case of credit collateral you have a choice of two types of policies:
- Level term insurance – in case of death a certain sum of money in the contract is paid. This insurance is suitable for people with interest-only mortgage.
- Decreasing term insurance – in case of death prescribed payment each year is decreasing. This option is good for people who have a repayment mortgage. This type of insurance is cheaper than level term insurance.
More information about life insurance can be found in an article devoted to this issue.
NOTE: I present private opinions and I am not responsible for the readers’ decisions. I always try to present current information but may no longer be up to date. Therefore, before making a decision, please verify them and consult a licensed financial adviser. Please refer to the page: disclaimer of responsibility, to make you aware of the importance of the information provided.