If you have children or dependants then it is worth considering taking out a life insurance policy particularly if they would not be able to support themselves when you are gone. The main thing to think about is the cost of living i.e. daily expenses calculated on an annual basis.

This may mean that you factor in your mortgage payments, their education costs, family maintenance and even charges related to medical care and treatment for elderly or disabled family members.

How to find the right policy for you

As a person with a family to look after, your choice for a life cover should be based on the type of job you have, leisure pursuit and health status.  You need to take into account your lifestyle if you are planning to take a life cover especially in cases where you have suffered critical illness or have existing health problems.

You should mention your smoking habits and alcohol consumption particularly because insurers will check your family history in order to establish your chances of survival.

Insurers also require information on your height and weight which they use to work out your Body Mass Index (BMI), this will help them determine the cost of your life policy. If you give false information regarding your health, drinking habit or chronic weight problems, your family or dependants may not receive the pay out when you are dead.

The type of job you do will affect your choice of life insurance and is likely to influence the cost of premium charged by an insurer. So, if you are a bomb disposal expert, a policeman or even an MP, your premiums will be higher than, say, someone whose job involves working in an office.

Experts say that it is important that you put your life insurance policy in some kind of trust for your family as this will ensure that they benefit from the cover as soon as you are gone. This also means that they will get the money from you policy more directly and you can control what happens to the money after your death including who gets what.

Trusts also ensure that the money is passed directly to your family without going through the taxman.

Types of life cover

There are six basic types of life insurance offered by the market, these are, Level Term Insurance also known as ‘protection only’. It is the cheapest and simplest option which guarantees to pay out a set amount if you die within a certain time. However, it doesn’t pay out anything if you live after the term agreed.

Increasing Term Insurance whose policy increases over the years without a need for a medical, however, premium also rises. On the other hand, Decreasing Term Insurance has cover that reduces over the years at a flat, fixed rate.

Mortgage Protection Insurance is connected to your mortgage and it decreases over time as the amount you still owe on the mortgage drops. Renewable Term Insurance offers a short-term policy that can be renewed at the end of the term without a medical.

Family Income Benefit is a policy that pays a tax-free annual income to your family or other dependents if you die instead of a one-off lump sum. Under this cover, the annual income lasts for a fixed period set by you.