Put simply, a life insurance policy is a financial product that you take out to ensure your loved ones receive a lump sum when you pass away.

There are several different types of life insurance policies. Each has slightly different pros and cons. Let’s get into what these are and why getting one might be right for you.

What is life insurance, exactly?

As with other insurance types, you’ll typically contribute a certain amount on a monthly or annual basis. When shopping around, you’ll notice different guaranteed payout sums that these policies offer to give your family when you die. The premiums will generally be higher for higher payouts.

Life insurance payouts can offer many benefits for your family. While they wait to receive the inheritance, they might struggle with funeral costs. Outstanding debt or mortgage payments might also be an issue. This is where a life insurance payout comes in handy.

There are several types of life insurance to choose from:

  1. Term life insurance

This is a policy that covers you for a set period only. Many people find it useful to have this type of cover as a protective net if there are young children in the picture or outstanding mortgage payments.

The attraction of this type of policy is that it ends when you are in a financial position that feels stronger.

Sometimes you can convert them to a longer-term policy later on when you might be in a better position to afford the premiums for this.

  1. Whole life cover

On the other hand, there’s whole life insurance. As the name implies, this one keeps going indefinitely unless you decide to cancel it. This name is used interchangeably with “life assurance” because it gives a sense of assurance that no matter when you pass away, your loved ones will receive a payout.

  1. Over 50s life insurance

Then there’s over-50 life insurance, a type of whole-of-life insurance policy that you can take out any time between the ages of 50 and 80.

Many of these policies offer guaranteed acceptance with no medical required. The premiums are often fixed as well, so there’s no need to worry about inflation.

  1. Joint life insurance

This insurance policy covers two people but only pays out for the first one who passes away. Couples often purchase this type of policy because the premiums are often cheaper. The idea is that after the policy pays out, the one to survive can go back to the drawing board and take out a new policy.

No matter what type of life insurance policy you are considering, it’s important to shop around. Calculate how much your family is likely to need, in the first case, and then start your search. It’s not just about the premiums; it’s also about the company’s reputation and which parts of the policy are guaranteed vs non-guaranteed.