Which type of cover might suit your situation?
The right type of cover depends on your personal circumstances and preferences. The sections below outline some common situations and the types of cover that people in those situations sometimes consider. In reality, there are so many variables to consider that there are no hard and fast answers for this, but the below can act as a starting point if you’re not at all sure what you need.
This is general information only and not financial advice. A professional financial advisor is best placed to examine your situation and provide guidance, if you feel you need it.
If you have children or financial dependants
For people with children or others who depend on their income, the primary concern is often what would happen financially if they were no longer around. Level term life insurance is a common consideration in this situation, as the payout stays fixed throughout the policy term, giving dependants a known lump sum to draw on.
For others, increasing cover offers even greater reassurance as it makes the payout more valuable in the longer-term. For example, if you have young children, you might take out £300,000 of cover which can be used by your family to help pay off a mortgage, contribute to day-to-day costs and then leave the children with some financial help for a house deposit one day. If you were to die tomorrow, that amount of cover may well do all of that. However, if you die in 20 years, £300,000 is likely to get you less than it will today. Increasing cover can better protect the idea of what you want to leave behind.
As mentioned above, family income benefit is another option sometimes chosen by families who would find a regular monthly income easier to manage than a large lump sum. This isn’t a product Post Office currently offers, but it’s available through other providers and worth being aware of.
If you have a repayment mortgage
People with a repayment mortgage sometimes consider decreasing term life insurance, as the cover is designed to broadly track the reducing outstanding balance over time. For an interest-only mortgage, where the capital doesn’t reduce, level term cover may be worth considering instead, as the payout remains fixed regardless of when during the term a claim is made.
Joint mortgage holders may also want to think about how their cover is structured. A joint policy pays out on the first death and then ends, whereas two individual policies each remain in force independently. There are trade-offs to both approaches, and what suits one couple may not suit another.
If you’re self-employed
Self-employed people don’t have access to employer benefits such as death-in-service cover, which means the financial protection they have in place tends to depend largely on policies they arrange themselves. Level term life insurance is one option commonly considered in this situation, given its fixed premium and fixed payout over a set period.
Business owners with partners may also want to look into specialist products such as relevant life insurance or key person cover. These are not products Post Office offers, but they serve distinct purposes and a financial adviser or specialist broker would be the right place to explore them.
