Choosing the right length of time for your life insurance cover
Life insurance is designed to provide a degree of financial security for your loved ones in the event of your death. Before you take out any kind of life insurance there are a number of questions you’ll need to ask yourself. How much do you need? What kind of premium can you afford? Who will the beneficiaries of the policy be? And what length of time do you need the policy to cover?
How long should I get life insurance for?
In general, the duration of your life insurance will be dictated by what you want it to cover. For most people, there are two main reasons you might want to take out a life insurance policy:
- To provide cover for a mortgage.
- To provide financial protection for those closest to you in the event of your death.
Another factor to consider is age. In general, the younger you are when you take out a policy, the lower the premiums will be. If you have an immediate need for life insurance, delaying your application may mean that premiums are more expensive in the future.
There are other restrictions on life insurance cover that could influence the minimum and maximum length of your policy. For example, the minimum age you can take out a policy with us is 18, and the policy must not end before your 29th birthday. There are other restrictions, both on the length of your policy, and the age by which your cover must end:
You also need to decide which type of life insurance cover would best suit your needs.
|Product||Maximum age for buying a policy||Minimum length of the policy||Maximum length of the policy||Your policy must end before age|
|Life Insurance||77||1 year||50 years||90|
|Decreasing Life Insurance||74||5 years||50 years||90|
Critical Illness Cover
|67||2 years||40 years||70|
You also have the choice between level term life insurance and decreasing life insurance.
Level term life insurance means the sum you’re covered for remains the same throughout the term of your policy. The premiums will remain fixed as will the possible payout, unless you change your policy. This type of life insurance is particularly suited to interest-only mortgages or family based protection needs.
Decreasing life insurance sees the amount of cover reduce over time similar to the way in which a repayment mortgage reduces as it’s paid back.
How long should you get mortgage cover for?
If you're taking out life insurance to specifically cover your mortgage, it makes sense to take it over the same period of time. For example, if you intend to pay your mortgage off over 25 years, your life insurance should match this. But always remember to review youe policy if you make any changes to your mortgage.
How long do you need to provide financial support for your family?
If you’re taking out life insurance to help make sure your family will be taken care of financially after your death, you should consider aligning the term with the point at which you believe your family will be able to manage the household budget without you. For example, you might want cover to last long enough to help your children complete full time education.
If you expect your partner to remain financially dependent for longer than this, you might also want to build that into your calculations.