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The primary reason you
might take out a life insurance policy is to provide a financial payout on
death so that family and loved ones have funds to replace a breadwinner’s
income and are not left without money at what would be a very difficult
time.
The cost of life
insurance is usually met by paying a steady monthly amount, or “premium”.
How much the premium is depends on a number of factors including your age
when the insurance starts, how much you want the plan to pay out if you die,
and your state of health and any special risk factors in your life. When
taking out the plan you nominate a beneficiary, who will receive the
insurance amount if the policy is called on.
The basic form of life
cover is called “Term Insurance”. This provides life cover for a specific
period (the “term”) and does not pay out if the person whose life is insured
dies after the term has expired. This form of insurance is particularly
appropriate when the term runs alongside a major financial commitment such
as a mortgage. The payout should not be reduced by federal income tax.
More extensive forms
of life cover known as “whole cover” (such as Universal Life, or Variable
Universal Life Cover), often involving an investment element, are available
for people who want something more than basic Term Insurance and you should
consult your adviser as to what is most suitable for your needs and budget. |
