You can take out life, impairment and severe illness cover for the rest of your life or for a term only. If you take cover out for the rest of your life it is known as whole of life cover.
Cover for a term only may be appropriate if:
- You need cover until you have paid off a debt. If you are covering your life until you have paid off a debt, the cover will typically decrease in line with the decreasing balance of the debt you are repaying.
Typically when you take out a loan on a home or car or to buy furniture or clothes, you have to take out a form of term cover known as credit life cover if you don’t have a suitable insurance policy which can be used as security.
- You only need life and disability cover until you have saved enough to retire and paid off your debts. At that time, your savings will fund your income or buy a pension.
Once you have saved enough to support yourself and your dependants, you may no longer need life cover.
If you take out life and disability cover that ceases at retirement as you will no longer need it, it may be cheaper than taking out cover until you die because the period for which you are covered is shorter.
You will need to weigh up the benefits of paying premiums for cover versus contributing more to your savings.
It is a good idea to hold some kinds of cover, such as disability cover that pays out on impairment and severe illness cover, for the rest of your life as you are most likely to incur additional costs of an impairment or severe illness in your later years.
