There are many people that do not have a great understanding of life insurance. It can seem like a rather dull subject and perhaps something that is not relevant to them. However, it is important to have an understanding about life insurance so that you can make an informed decision as to whether you think that you and other members of your family need it. Most people know that life insurance will pay out when you die. However, it is important to understand about the two main types of insurance and when you may decide to use them.
Life insurance will cover you for a specific time period that you determine. This means that it might be used to cover the amount outstanding on your mortgage until the amount owed is paid off. It might be used to provide a pay out if you die until your children are at the age they will be earning money themselves, so you may take it out until they are 18. At the end of the term of the insurance, you will get nothing back if you survive. If you die, your beneficiaries will get the agreed pay out amount.
Life assurance is quite a different thing. It still has a life insurance element where a lump sum will be paid out of you die. However, the big difference is that it has an investment element and so although if you die early on, you will get an agreed lump sum, once the policy has gained value, you will get more than this. If you outlive the policy you will get value of the investment, usually annual bonuses and a terminal bonus as well. It is even possible to cash in a life assurance policy if it has earned some value although many people choose to sell them to an investment broker in order to make more money.
Which to Choose?
If you are considering life insurance and wondering which to choose, then it is first worth considering what the purpose of the insurance is. If you want to make sure that there is definitely some money when you die then life assurance would be the right thing to go for. However, if you only want the cover to last until your dependents can support themselves or loans are paid off, then a life insurance policy would do the trick. However, if you had life assurance, you could cash it in when you no longer need it and you may get some money back.
Like with all investments, there is no guarantee that there will be any money to pay out to the beneficiary. Investments are risky and with the stock market not performing that well, many investments that depend on it, such as life assurance are not paying out so well. There have even been restrictions on being able to cash in some policies because they are not doing very well. But all investments should be long term and the longer you keep the money invested, the more chance you will do well from it.
The cost is a big factor to consider though. Life insurance is a lot cheaper than life assurance. This means that you may only be able to afford life insurance unless you have some spare money that you are willing to invest. You may also find that there are better places to invest than a life assurance policy and so it is worth giving it some very careful thought. You may therefore find that the life insurance is enough to cover your needs and will give you the peace of mind that you desire.