If you take out a life insurance policy, you will normally make a choice between two standard types: level term and decreasing term. Both types are designed to protect your biggest financial commitment, which for most people is their mortgage. Each has its advantages and disadvantages, and the best advice to take is to consult a high quality life insurance provider such as Legal & General, whose staff are well qualified to propose the best one for you. They are also equipped to provide a range of flexible and tailored policies, designed to assure maximum peace of mind.
Because your mortgage is what keeps the roof over your head, it makes good sense to protect it in case of unexpected events – this could be losing your job, becoming seriously ill and unable to work, or even passing away. Protecting your mortgage means that you and your loved ones still have somewhere to live, in the family home you have worked hard to provide them with. Certain life insurance policies have clauses built in to cover such eventualities, and it is best to consider what your priorities are. Your financial adviser will then be able to propose the best one for you.
You will probably choose between level term and decreasing term insurance. Level term works by paying a lump sum to your estate if you die during the time you are insured, and this amount will typically equal your original mortgage amount. So depending on the amount you have yet to repay, there may be some cash left over to meet obligations like outstanding credit cards and funeral expenses etc.
Decreasing term insurance pays an amount out that decreases over time, reflecting the amount you still owe on your mortgage. It is cheaper than level term, and still provides the primary aim of repaying your mortgage, but if you have other debts it may not be the best option for you.
The life insurance market is extremely competitive at present, and it is a very good time to get a good deal. Given the global credit crunch and increased cost of living for us all, taking out a life insurance policy would make perfect sense at this time of great uncertainty – one less thing to worry about and a highly sensible investment.