Parents opt for life insurance to protect their children

More and more people are opting to insure their lives in order to protect their families from the threat of potential financial hardship in the event that they die or are diagnosed with a terminal illness.

But instead of taking out a life insurance policy, some people choose to self-insure – whereby they pay money into a high return savings account instead of paying money to an insurance company – because they do not like the idea of giving money away if they never have to make a claim. While this might sound good in theory, this plan could backfire for them and their children if they die before the savings plan has a chance to accrue any substantial value.

For instance, even if the policy holder were to pass away within 10, or even 20 years, of starting the savings fund, this probably still wouldn’t be enough to cover the average mortgage, which could mean that the family might have to downsize its home.

However, with a life insurance policy, parents can protect their children from having their world turned upside down any more than necessary by insuring their life for a sum which is big enough to cover everything they contribute to the household finances. This can include the outstanding mortgage on their home, any other outstanding debts, such as credit cards and loans, and to provide for other aspects of their life, such as school fees, university, a deposit for their first home, or travel costs.

If someone just wants to cover the mortgage on their home, then the policyholder can opt for a decreasing term policy, which means that the payout will decrease in line with the value of the mortgage. Even though the payout will decrease, premiums will remain the same, but will usually be cheaper than term life insurance.

Term life insurance means that the policyholder also pays a fixed monthly payment, but the lump sum payout also remains the same – in essence, they are insuring their life for a pre-determined amount.

When buying life insurance a lot of people prefer to arrange their policy via a financial advisor; doing so, however, they could be missing out on the best deals by not comparing them online, where they can find quotes from almost every insurance company on the market and make sure they are getting the best deal.

While the difference in cost between one premium and another might seem minimal, a customer could be paying it for many years. This nominal sum could add up to thousands of pounds wasted by not shopping around and comparing life insurance quotes, so a few minutes online could save a great deal of cash.

Daniel Collins writes on a number of topics on behalf of a digital marketing agency and a variety of clients. As such, this article is to be considered a professional piece with business interests in mind.