As a contractor is it important to take out the necessary life insurance to ensure that your family is taken care of in the unfortunate event of something happening to you.
The topic of life insurance is one that we would all prefer to avoid, but avoiding means that you are not prepared. Unlike your permanent counterpart, you will not be covered by a workplace policy provided by your employer. It is up to you to have put in place all the necessary means to make sure that your family is protected.
There are two main categories of cover and it is important to understand fully which one is appropriate for you and your family.
The first is Term Cover. This is the less expensive of the two and simply lasts for the term in which you specify. A period of time is decided and once the agreed end date has surpassed, the cover will finish.
The other option is Whole Life Cover. This will cover you from any age until death. It is more expensive but is essentially more common for contractors and freelancers as it provides a longer term-cover.
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What options are available to contractors?
Level term assurance plan
This plan offers a lump sum paid out to your dependants. This means that your family are not left with debts and a mortgage. This enables your dependants to invest the lump sum so that the interest will give them an income.
Family income benefit plan
This plan will set a predetermined income to help your family with the bills and mortgage repayments. It also takes the stress off reinvestment.
Whole of life policy
This policy doesn't have an end date but will cover you for the duration of your life. You can add to the policy to ensure that payments are manageable as your income is lessened in retirement.
Decreasing term assurance plan
This life insurance plan pays a slow reducing sum which is entirely dependent on when death occurs.
Your mortgage repayments will need to be covered to avoid repossession of your home, so it is vital that your level of cover you choose is sufficient and appropriate. It is always important to seek expert advice on matters as sensitive and important as life insurance. A financial adviser will be able to help you put in place the correct level of cover for you and your family.