Life insurance
savings plan

Generally speaking, the shorter the policy term, the cheaper the monthly premium.

Therefore, it's important to consider what you're looking to protect and ensure the term length is appropriate.

For example, you may want your life insurance term to align with your mortgage, securing what's probably your largest asset. Or perhaps until the children have left home and are financially independent.

A higher pay out sum, usually means paying higher premiums.

It's important to find the right balance between having enough cover so that your loved ones aren’t exposed, but not too much cover, so that the cost is unnecessarily high.

Think about how much you have left on your mortgage, the cost of family living costs and any personal debt you may have. Ideally, your policy pay out should cover all this.

Please note: Some employers offer group life insurance (or death in service). If you enjoy this employee benefit you may be able to trim the cost of your own life insurance accordingly. (Remember if you change your employer you could lose this benefit).

Taking out joint life insurance requires you to pay one monthly premium, instead of two.

As a result, it's usually cheaper than taking out two single policies - offering a significant saving over the entire policy term.

One thing to be wary of, however, is that joint life insurance only pays out once. Whereas two single policies offer two separate pay outs.

This means that the remaining partner is left either having to obtain a new policy whilst older (which is likely to bring with it increased premiums) or risk being uncovered.

Therefore, the suitability of joint life insurance is dependent on your individual circumstances and level of life insurance cover you require.

The key difference between an endowment policy and life insurance is when/if a pay out is made.

An endowment policy guarantees a pay out whether or not you outlive your cover, meaning the pay out could be received by yourself or your loved ones.

Life insurance, on the other hand, only pays out upon your passing, meaning the key benefit is to your loved ones only, as opposed to you as the policyholder.

If you outlive your life insurance, no pay out will be issued.

With regards to life insurance, the pay out amount is set in stone. Therefore, if a pay out is made within the term, regardless of when this is (in year 5 or year 20) the sum assured remains the same.

Whereas, the pay out amount from an endowment policy can fluctuate depending on the performance of the investment part of your policy.

If you pass away during an endowment policy, the pay out amount will combine the value of your life insurance and investment, but outliving your policy will result in a pay out amount consisting of your investment value only.

Determining whether or not you're best suited to an endowment policy or life insurance will depend on what it is you're looking to secure in terms of protection.

Unfortunately, life insurance is not a savings plan in the traditional sense.

Paying into a life insurance policy won't result in a pay out to the policyholder, therefore, making it an ineffective means for saving money for future goals.

However, it can be seen as a means for saving money for your loved ones upon your passing.

A life insurance policy can pay out a sum of up to £1,000,000 (depending on your personal circumstances and budget); a sum most wouldn’t have the ability to provide their loved ones even if they saved during their lifetime.

However, it will only pay out to your loved ones if you die within the policy term, or have a policy which offers whole of life cover.

Therefore, by securing life insurance cover, you can be seen as saving for the financial future of your loved ones after you're gone.