This article was contributed by Nina Petrov
Most people are aware of the basic advantages of getting life insurance: should you unexpectedly pass, your family will receive money from the insurance company. Therefore, you have the assurance that they will have the financial resources needed to continue on without you.
While this basic advantage applies to all types of life insurance, there are additional benefits based on the precise type of policy and quantity of coverage you obtain, and some of the main ones are explained below.
Mortgage Repayment
Mortgage life insurance is a special kind of life insurance policy that is intended to pay off your mortgage if you die unexpectedly. It acts as a financial safeguard for your loved ones so that they do not get saddled with mortgage payments they cannot afford.
A mortgage repayment policy is often offered as either a decreasing-term or level-term policy. If you die within the duration of the policy, both of these types of plans will pay out a lump sum to your beneficiaries, much like normal life insurance. With decreasing-term plans, however, the lump sum will get lower in proportion to the remaining balance of your mortgage.
Keep in mind that the amount of coverage you obtain should be equal to the amount owed on your mortgage. The amount your policy pays out decreases over time, so be sure it decreases at the same rate as your mortgage. If you get too little insurance, your payment may not be enough to cover the mortgage in the event of your passing.
Income Replacement
One of the primary reasons many individuals get life insurance is so they can replace their income in an emergency, especially if they have loved ones who rely on them financially. Having life insurance for income replacement implies that if you die, your dependents will be able to maintain their current standard of living. This kind of insurance might be especially pertinent in terms of single parent’s life insurance, as well.
Common components of income replacement include:
- Determining how much money you will need to replace your income during a specific time period
- The kind of insurance policy you want to get to replace your income (e.g. critical illness insurance)
- Designating your primary dependents (e.g. anyone who is financially reliant on you and your salary)
Simply put, income replacement entails creating a financial plan for your dependents through the use of an insurance policy.
Tuition Funding
Getting life insurance in order to fund your children’s higher education can be done if you opt for a cash value policy, such as universal or whole life insurance, rather than term life insurance, which doesn’t have a cash savings component.
The money under universal or whole life insurance can be used to pay for anything, including tuition. Whole life insurance coverages are a particularly popular way to achieve this because they accrue cash value over time, and the cash value is yours to spend should you ever need to. Whether it is for university costs, an emergency fund, or a large one-off payment, your whole life insurance can be used while you’re still alive.
Universal life insurance is another viable option. The cash worth of universal life insurance can be utilised in the same way as a bank account. The distinction is that withdrawing cash will be viewed as a loan, even if you are actually borrowing from yourself – but you can also take your time to repay it.
Disability Insurance
If you rely on your income from employment to cover your expenditures, you should probably consider obtaining disability insurance. It assures that you will continue to earn a portion of you income if you become unable to work due to illness or injury.
Disability affects many more working individuals than you might realise. Sickness causes more disability than injury does, including common ailments like heart disease and arthritis, and Workmen’s Compensation does not actually cover the majority of disabilities.
Some firms will provide their employees with both short-term and long-term disability insurance. A short-term policy assists you quickly following an emergency, but a long-term plan provides cash protection for disabilities that might persist for years. You can also pay for supplementary coverage on top of any employer-provided benefits to provide further financial security.
Personal Alarms from LifeConnect24
If you are worried about your wellbeing, consider a personal alarm from LifeConnect24. In the event of a fall or other emergency, help can be arranged at the press of a button. For more information read our helpful guide, or call us on 0800 999 0400 and our friendly team will answer any questions you may have.
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