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Life Insurance

Life insurance, explained simply.

Three main kinds, each designed to do a different job. Once you know which job you are trying to do, the choice gets much easier.

Nobody enjoys this conversation. But it is one of the few financial decisions where doing something imperfect is almost always better than doing nothing at all.

Here is what the options are and what each is built for.

What is it?

Life insurance is a contract. You pay premiums; if you die while the policy is in force, the insurer pays an amount of money — the death benefit — to the people you have named.

That money is not earmarked for anything in particular. Your family decides what it is for: keeping the house, replacing an income, covering a funeral, clearing a debt, giving someone time to breathe.

Who might it be for?

The usual reasons people sit down with me about this:

  • Someone depends on your income — a spouse, children, a parent.
  • You have a mortgage or other debt that would not disappear.
  • You have children at home, or are helping to raise someone.
  • You want your family to be able to cover a funeral without scrambling.
  • You have a policy through work and are not sure it is enough, or what happens if you leave.
  • You bought a policy years ago and have not looked at it since.

What options are available?

  • Term life insurance

    Coverage generally designed to provide protection for a certain period of time — a term of years that you choose at the outset. If the policy is in force and the insured person dies during that term, it pays the death benefit.

    It is usually the most affordable way to get a large amount of coverage, which is why it is so often used to cover the years when the need is largest.

    Worth knowing: When the term ends, the coverage ends, unless the policy provides some way to continue or convert it. What those options are, and what they cost, is set out in the specific policy — worth knowing before you buy, not after.

  • Whole life insurance

    Permanent life insurance that can remain in force as long as the policy requirements and premiums are met, rather than expiring at the end of a term. Depending on the policy, it may also build cash value over time.

    Worth knowing: Permanent coverage generally costs more per dollar of death benefit than term coverage. How cash value builds, what you can do with it, and what happens if you access it all depend on the policy’s own terms.

  • Final expense

    Generally smaller permanent policies, designed to help families prepare for funeral and burial costs, final bills and other expenses that arrive at the worst possible moment.

    The amounts are modest by design, and the application process is usually simpler than for larger policies.

    Worth knowing: Some final expense policies have graded or limited benefits in the early policy years. If that applies, it will be written in the policy, and you should understand it before you sign.

  • Living benefits

    Some policies may include, or offer as riders, the ability to access part of the death benefit during the insured person’s lifetime after certain qualifying events — subject to the actual terms of that policy.

    Worth knowing: This one matters, so let me be blunt: not every life insurance policy includes living benefits. Whether any are available, which events qualify, how much can be accessed, and what it costs to do so are all determined by the specific policy and rider wording. Anyone who describes living benefits as something life insurance simply comes with is overstating it. I will show you what your policy actually says.

How much might I need?

There is no universal formula, and anyone who gives you one without asking questions is guessing. Working it out usually means looking at:

Income
What would need replacing, and for how many years.
Mortgage
What is left on the house, and whether you would want it cleared.
Other debt
Loans, cards, anything that would not go away.
Children and dependents
How many, how old, and how long they would need support.
Final expenses
Funeral, burial and the bills that arrive immediately after.
Existing insurance
What you already have, including through work — and whether it follows you if you leave.
Savings
What your family could already draw on.
Long-term obligations
Anything you have committed to that would outlive you.

We can go through this in about twenty minutes. Most people find the number is different from what they assumed — sometimes higher, quite often lower.

What should I know or consider?

A few things worth holding on to:

  • The policy document is the product. Marketing describes it; the contract defines it. I will always point you at the actual wording.
  • Health and age affect what is available and what it costs. Most life insurance involves some form of underwriting, though how much varies a lot by product.
  • Coverage through work is not always portable. Check what happens to it if you change jobs.
  • Being honest on the application protects your family. Answers that are not accurate can cause a claim to be questioned later, when they can least afford it.
  • Naming your beneficiaries, and keeping them up to date, matters as much as the policy itself.
Take a moment

A few questions worth answering

Five questions, nothing scored. They help me understand what you are actually trying to protect, which is a better starting point than a quote.

  1. 1 of 5 What has you thinking about this now?
  2. 2 of 5 Which of these do you already understand?
  3. 3 of 5 How would you want to work out how much cover you need?
  4. 4 of 5 Have you come across “living benefits”?
  5. 5 of 5 What would you want to be certain of before signing anything?

Life insurance is less about the product than about the number, and the number comes from your situation rather than from a table.

Book a time — and I will have your answers in front of me

Leave your name and email and your answers come with the booking, so we do not spend the first ten minutes covering ground you have already covered. Contact details only — please keep health details out of this, we will go through those properly when we talk.

Would rather not? Book without sending your answers.

Keep reading

Related pages

Request a life insurance review.

Whether you have nothing in place or a policy you have not read in years, I'll go through it with you and tell you honestly what it does and does not do.

Request a Life Insurance Review Book a Time