By Arnab Dey
Recent statistics show there are approximately 24 million types of life insurance policies in place in the UK, but how many people actually understand what each type of insurance does or how to compare them?
In this article, we’re going to break down the three most basic types of life plans, giving you an understanding of why each is important.
Let’s dive in!
Whole of Life
If you’re looking for life insurance, then chances are you’ve come across or considered the Whole of Life policy. As the name implies, this type of cover offers lifelong protection, so it’s worth taking the time to understand how it works and whether it’s the right option for you.
Also known as permanent life insurance, Whole of Life covers you for your entire life, as long as you continue to pay the premiums.
It can be a good option if you want to leave something behind for your loved ones, or if you’re looking for peace of mind that your family will be taken care of financially if you pass away.
These types of life insurance plan usually have higher premiums than term life insurance, because they last for your whole life. In the same vein, they also typically come with a death benefit that is much higher than a term life policy.
So, if you’re looking for the most comprehensive coverage possible, Whole of Life insurance is exactly what you need.
Before taking out the cover though, make sure to compare different options and find the one that best meets your needs. Also, be sure to read the fine print carefully to understand all the terms and conditions of the policy before you sign on the dotted line.
Term Life
A term life insurance policy is the most basic and straightforward type of life insurance. It’s designed to provide financial protection for a specific period of time, typically 10-30 years.
This means if the insured passes away during that time frame, the death benefit will be paid out to the beneficiaries. But if the insured survives to the end of the term, the policy will simply expire and there will be no death benefit paid out.
Term life insurance is an affordable way to make sure your loved ones are taken care of financially if you were to pass away unexpectedly. It can give you much-needed peace of mind knowing that your family will not have to bear the burden of funeral expenses or other debts you may leave behind.
There are some drawbacks to term life insurance, however. Because it only provides coverage for a set period of time, it may not be adequate for someone with long-term needs. Also, if you do need to extend your coverage beyond the initial term, it can become quite expensive.
Still, for most people, term life insurance is a sensible and affordable option that can give them and their families peace of mind.
Critical Illness Cover
While shopping for life insurance, you may come across a type of coverage called “critical illness insurance.” This policy provides financial protection in the event that you become seriously ill and are unable to work.
While critical illness insurance is not always required, it can help you stay at ease knowing that you and your family will have some financial support if you face a serious health issue.
If you’re considering this type of coverage, here’s what you need to know:
How does critical illness insurance work?
For starters, critical illness insurance pays out a lump sum amount if you are diagnosed with a covered condition. The benefit can help to cater to the costs associated with your illness, such as medical bills or income replacement.
Is there a waiting period?
Most policies will have a waiting period before benefits are paid out but this varies from one insurer to the other. It’s important to read the fine print carefully before purchasing a policy.
What conditions are covered by critical illness insurance?
When taking out critical illness cover, it’s important to understand the conditions that are covered. The majority of policies will cover common conditions such as cancer, heart attack, and stroke. However, there can be variations between plans, so it’s important to find out more before you can even ask for that critical illness cover quote.
Conclusion
So, there you have it! A beginner’s guide to the three most common types of life insurance policies. Of course, there are a lot more options available, and the best one for you will depend on your individual circumstances. Be sure to do your research and speak with a financial advisor to figure out which type of life insurance is right for you. Good luck!
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