How long should I get life insurance for?

What is life insurance?

Life insurance is a financial product designed to provide security to your loved ones in the event of your death. It involves a contract between you and an insurance company, where you pay regular premiums in exchange for a guaranteed payout to your beneficiaries upon your passing. 

This payout can cover essential expenses such as mortgage payments and childcare costs, offering peace of mind your loved ones have the resources to maintain their standard of living after you are gone.

What factors influence life insurance policy length?

There are several factors that affect the length of a life insurance policy.

1. Your age and stage of life

Your age significantly impacts the length of a life insurance policy. Younger people may opt for longer terms, such as 20 or 30 years, to ensure coverage during critical life stages such as raising children or paying off a mortgage. 

Conversely, older people might choose shorter terms that align with their current financial obligations or retirement plans. Common durations vary by age group; for example, those in their 30s often select 20-30 years, while individuals in their 50s may prefer policies lasting 10-20 years.

2. Dependents and financial dependence

Dependents greatly influence the life insurance policy length you should consider. If you have children or a non-working spouse who relies on your income, extending your coverage duration provides essential financial protection until they are self-sufficient. 

Families with young children might select longer terms to ensure adequate support during their upbringing, while those with older children may choose shorter terms as they approach independence.

3. Mortgages and other debts

Aligning your life insurance policy length with major loans or your mortgage is crucial for ensuring your loved ones can manage these financial obligations in your absence. 

If you have a mortgage with a remaining term of 25 years, opting for a term life insurance policy that matches this duration ensures that the payout can cover the mortgage balance if needed.

4. Your future financial goals

Your future financial objectives also play a role in determining the length of a life insurance policy. Consider significant upcoming expenses such as university fees for children or retirement needs. 

If you anticipate substantial costs in the next few decades, selecting a longer policy term can provide peace of mind, knowing that funds will be available when required.

What are the common lengths of life insurance policies?

When considering how long life insurance lasts, it is essential to understand the various types of policies available and their typical durations.

Term life insurance policies are available in common durations like 10, 20, or 30 years. They provide coverage for a specified period and pay out only if the insured passes away during the insured term.

Whole life insurance remains active throughout the insured's lifetime as long as premiums are paid, offering both a death benefit and a cash value component that accumulates over time.

In some situations, shorter or longer policies may be more suitable based on individual circumstances. For instance, a short-term policy may suffice if you have temporary obligations such as paying off student loans.

Conversely, if you seek lifelong coverage for estate planning purposes, whole life insurance may be more appropriate.

As for costs, the average monthly premium for term life insurance is currently £37.02, while for whole life insurance, it is £85.61.

How long does life insurance take to pay out?

Payout timelines for claims can vary based on several factors. Typically, insurers process claims within 30 to 60 days after receiving all necessary documentation. However, common delays can occur due to incomplete paperwork or discrepancies in the information provided. 

To avoid these issues, it is essential to ensure that all documentation is accurate when filing a claim. Providing thorough information helps expedite the claims process and reduces complications.

It is also crucial to keep your circumstances up to date. Regularly reviewing and updating your policy ensures it reflects any changes in your situation, such as marriage or starting a family.

This practice guarantees your beneficiaries receive the appropriate payout amount without unnecessary delays.

How to choose the right policy length for your needs

When considering life insurance policy length, use these tips:

1. Assess your current financial obligations

Begin by evaluating your existing responsibilities, including mortgages and loans. Understanding these obligations helps determine how much coverage you need and how long it should last.

2. Consider future expenses

Next, think about anticipated future expenses such as education costs for children or retirement savings needs. By factoring in these potential costs, you can choose a policy length that ensures adequate support when these expenses arise.

3. Seek advice from a qualified expert

When determining the appropriate life insurance policy length, seeking professional advice can be invaluable. 

Insurance brokers specialise in tailoring policies to fit your unique circumstances and ensuring comprehensive coverage based on your needs. They can help navigate available options and confirm your policy covers everything essential.

Financial advisers also provide broader insights into how life insurance fits into your overall financial strategy and guide you in selecting a policy length that aligns with both current obligations and future goals.

To ensure you receive expert advice, consider consulting professionals through Unbiased. We will match you with trusted advisers or insurance brokers who can help you make informed decisions about your life insurance needs.

How to review and adjust your life insurance policy

Life insurance needs often change over time due to key milestones such as the birth of a child or buying a home. These events may require reassessing coverage to ensure it aligns with financial responsibilities. Many policies offer flexibility, allowing adjustments as your circumstances evolve.

To keep your policy affordable when making changes, review your budget and financial obligations regularly. Options such as adjusting coverage levels or premium payments can help maintain affordability while meeting your needs.

Reviewing and adjusting your policy is straightforward. Begin by comparing current coverage to your financial situation and goals. Then, consult an insurance broker or financial adviser for expert advice on necessary changes.

Regular reviews, ideally once a year, ensure your policy remains relevant and effective as life progresses.

Get expert financial advice

Life insurance is a vital component of financial planning, ensuring your loved ones are protected in the event of your passing. 

By understanding the factors that influence the length of a life insurance policy, exploring the various types of insurance available, and seeking professional advice, you can secure a policy that aligns with your financial goals.

Let Unbiased match you with a professional financial adviser or insurance broker who can ensure you select the right policy length and coverage to meet your evolving needs.