Life Insurance

The main purpose of life insurance is to protect people who depend financially on the insured person, such as a partner or children, so they can pay off debts, cover living costs or fund education if that person dies.

There are two broad types. Term life insurance covers a set period, such as 20 years, and pays out only if death occurs during that time. It is usually much cheaper. Permanent life insurance, such as whole life and universal life, covers the whole of life and often builds up a cash value, but costs considerably more.

For example, a parent with a mortgage and two young children might buy a term policy paying 300,000 if they die before the children reach adulthood, so the family could clear the mortgage and cover costs.

Premiums depend on age, health, lifestyle, the amount of cover and the length of the policy. Buying younger is usually cheaper. People without dependants may need little or no life insurance, while those with significant debts or dependants often need more.