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Life insurance policies pay some kind of benefit if your health suffers or if you are unable to work as a result. Life insurance premiums are calculated using information based on your age, health, lifestyle and occupation.

There are a wide range of similar policies now available through a wider variety of channels - from leaflets in the supermarket to insurance brokers and financial advisers - which mean that you can concentrate on searching for a policy, based on price rather than complicated added extras.

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Life insurance - Protecting your family and dependents

Life insurance is about providing some financial security for people who depend on you if you died. (So if you don’t have a partner, spouse or civil partner, children, or other dependents, you may not need life cover.)

To make sure you buy the right amount of cover, with the right terms and conditions, you should consider getting some advice. The adviser assesses what your family would need, and shops around for the cover that suits you best.

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A permanent life insurance policy will remain in force until it matures. At maturity the policy is guaranteed to pay out. There are three main types of permanent life insurance; whole life; universal life; and variable life. They all provide full life cover to protect against the risk of death of the insured. They are designed to be a long term product and also act as an investment. Some policies have the added benefit of profits in the form of interest payments or dividends (this is called ‘with profits’). A permanent life policy is an assurance policy. That is, the policy provides protection against an event that is sure to happen. The policy holder or their beneficiaries will definitely receive a payout. This is a why premiums are much higher than for a term insurance.

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Of course we all want to remain optimistic for the future which could perhaps cause some of us to shy away from the notion of life insurance - it can feel like a rather morbid thing to be considering. Maybe it’s necessary to think objectively about why it’s a good idea, imagine, for instance, what would happen to your family if you were to pass away today. Would they be able to cope financially if your current life insurance is insufficient or you have no cover at all? Consider for a moment the impact on your families income should your contribution be taken away.

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Taking out life insurance is a way of ensuring that should you die unexpectedly, your dependents will be looked after financially. Before buying a policy you need to work out exactly how much your family would need if the worst happened, and this would be your ‘sum assured’. That sum, together with your sex, age and your general state of health would be used to fix the amount of your ‘premium’ – how much you would pay each month to be insured.

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