5 key reasons to buy life assurance

If you’ve considered buying life insurance you’ve most likely come across the term – life assurance. Life is often hard to predict and therefore none of us can pinpoint exactly when we will die. What we can do is give our families peace of mind, protecting them whenever the time comes.

What is life assurance?

Most commonly known as whole of life insurance, life assurance covers you for the rest of your life. When you die, your insurer pays out a cash lump to your loved ones, providing financial support during this difficult time.

Just like any type of life insurance, when you take out the cover you pay monthly premiums to your insurer. Failure to pay these premiums can result in your cover being ended early.

There are two types of life assurance cover:

• Balanced – Your premiums remain the same throughout the policy. Even as you get older and more vulnerable to health problems, you will still be charged the same. 

You also have a fixed lump sum, agreed upon by your insurance provider,  that pays out when you die.

• Maximum – Your cover is linked to an investment fund. Each month your insurer invests the money you pay for premiums. The aim is to generate a large enough return to cover the eventual payout.

This has a sense of risk vs reward, if the investment performs well you may even have bonuses added to your policy. However, if it fails your premiums could be raised to cover the loss.

So why should you buy a policy for life assurance?

• Protect your family

Life assurance is a great way of giving your loved one’s peace of mind, especially if they depend on you financially. The money you leave to your family can replace the income lost when you die.

Your loved ones can use this money towards everyday living expenses, household bills and other costs they need support with. This is even more important for young families who may not have the financial security in place to support themselves.

• Permanent cover

Generally the most expensive form of life cover, life assurance has a feature that sets it apart from its cheaper alternatives.

One of the main benefits of whole life cover is that it provides permanent cover – as long as you keep paying for premiums. The policy ensures that your family receives a pay-out, no matter when you die. 

This can put any worries about future finances and security your family may have, at ease.

• Covering a mortgage

For many of us, a mortgage is one of the biggest payments we will make in our lives. When you die, your mortgage doesn’t just disappear, your provider will still expect repayments to be made. 

Because of the lost income, your family will need extra support to clear your mortgage. The payout from your life assurance can allow your family to clear the full – if not most, of the money owed on your mortgage.

• Funeral planning

In what will already be a difficult time, you won’t want to leave your family out of pocket by paying for your funeral. Luckily, they can use the money from your policy to give you the send-off you deserve whilst keeping them financially secure.

• Leave an inheritance to your children

Depending on when they die, the money doesn’t need to be used straight-way. In fact, it can be left to your children to support them in the future. This could be used to pay for their university studies, a first car or home.

Life insurance or life assurance?

Life insurance usually refers to a certain type of policy known as term life insurance. Unlike life assurance, this covers you for a set number of years instead of permanently. Because of this, it is generally cheaper than life assurance.

When you take out cover, you choose the length of cover (i.e 20 years), agreed with the insurance company. Your loved ones only receive a policy if you die within the agreed time.