Standard whole-life and term life insurance products are likely familiar to you. Whole-of-life insurance provides a payout to your beneficiaries as long as you adhere to any terms and conditions. It lasts from the policy start date until your death. Term life insurance provides a payout if the insured dies within the policy’s dates. However, it does not do so if the insured dies beyond the policy’s expiration date.
There are other life insurance policies that serve a variety of purposes and may be more suited to your needs and way of life. So, here are four life insurance products you may never have heard of.
Family income benefit
Family income benefit is a type of life insurance policy that could lead to your beneficiaries receiving regular income for a specified period of time rather than a lump sum of money. Typically, you tell the insurer how much money your family will need if you die. Then they base the premium cost on that. If the worst were to happen to you, family income benefit could help your family pay bills or keep up with mortgage payments. It differs from traditional term life insurance policies in that the amount paid out decreases over time. For example, if your coverage lasts 20 years and you die in the 15th year, your beneficiaries will receive 5 years’ worth of payments rather than a lump sum payment.
Critical illness cover
A critical illness policy is a type of life insurance policy that pays out if you are diagnosed with a serious illness that is specified in the policy terms. The tax-free payment can be used for anything you need during your illness. Such as covering potential income loss for you and your family or adapting your home, for example, for wheelchair access.
Decreasing life insurance
Decreasing life insurance is a policy that pays out less money as time passes and is also known as mortgage protection insurance. This is because it is commonly used to pay off your mortgage balance in the event of your death. As a result, as you make payments on your mortgage, the amount of your potential insurance payout decreases.
Increasing life insurance
Increasing life insurance is a policy in which the payout and premiums rise in line with inflation to compensate for any value lost. This is usually up to a maximum of 10% per year. As your potential payout amount grows, so will the cost of your premiums.
Variable life insurance
Variable life insurance policies include stock or bond investments to increase cash value. It carries a higher risk because your premiums are invested in the stock market. This causes the value of your payout to fluctuate depending on economic conditions. If your investments do not perform well, you may receive a lower payout. However, if your investments perform well, you may receive a much higher payout than with other options. Most variable life insurance products also use compound interest, which allows you to maximise your returns on investment if you start early and invest for a long time.