Life insurance

If you and your partner don't have life insurance or if the cover from your existing policy is inadequate then there is a gap in your financial protection. Take time to shop around for the right type of policy:

• Term insurance is the simplest type. It pays out if you die during the term of the insurance, which can be as little as five years or as long as 30 years and is popular for covering a large debt such as a mortgage. If you outlive the term the insurance expires and you get nothing back.
• Decreasing term insurance, as the name suggests, decreases over time in line with the debt. Your mortgage, for instance, will gradually be paid off over 25 years and if you were to die 20 years into the mortgage, less money would be needed to settle the debt and this could be provided by the decreasing term policy.
• Whole of life insurance takes the idea on a step further. It covers your entire life and unlike term insurance it will definitely pay out so doubles as an investment for relatives. It is possible that if you pay into a whole of life insurance policy for long enough that you can stop monthly premiums and even cash in the investment although returns may not be very high. Because there is an inevitable payout this cover is usually much more expensive than term insurance and the premiums are likely to increase regularly.
• Rolling term insurance is a half-way house between term and whole of life. It guarantees cover throughout your life without medical checks. There is a payout at the end of the insurance policy but unlike whole of life insurance the premiums are less likely to rise by as much.
• Death in service benefit is the cheery name given to the financial lump sum attached to many company pension schemes. If you die whilst employed then these will typically pay three times your salary which might mean that you won't need to take out life insurance. However, if you change employer you may lose this.
• Endowment investment returns have fallen drastically in recent years as stock markets and interest rates have dwindled. This has meant under current circumstances they may not provide a big enough payout to clear your mortgage. However along with the investment there is also life insurance which is designed to pay off the mortgage if you die during the term. Endowments are similar to term insurance in that they last for a certain period. However, you may not want to rely on them to deliver a certain amount.