As a person who has been diagnosed with Type2 diabetes, you’re reviewing your life insurance, or are considering getting life insurance. After all, no matter who you are, life insurance helps your family to cope financially if you were to pass away. That matters to you. But if you thought life insurance was a type of insurance on its own, you might be surprised to find that there are several types of life insurance.

This leaves you with questions beginning with “What type of life insurance do I need?” To eliminate confusion, let’s take a look at what all the different life insurance types are. It can be difficult to decide unless you know what is meant by terms like “term life insurance,” “whole life insurance,” and “joint life insurance.”

What is Term Life Insurance?

Term life insurance only provides cover over a specified period of time. If you die during that “term,” death benefits are paid out to your family. One of the big benefits of this type of insurance is that the payout is larger.

While term life insurance means that you don’t have cover if you outlive the term, the length for which the term runs determines how likely it is to be a beneficial deal.  Since the primary goal in taking out life insurance is to cover your family against financial difficulties in the event of premature death, it’s worth asking yourself how necessary life insurance would be if you don’t die prematurely. What if your children are already out of the house and fully independent? What if you have no debts by that time?

What is Whole Life Insurance?

In this model, your life insurance is a permanent policy whose value increases over time. As long as you keep paying your premiums, your policy remains active until the day you die and it’s time for it to pay out.

So far, it sounds pretty reasonable, but there are drawbacks to whole life insurance. The premiums are predictable, but they’ll be higher, and the value of the policy takes time to accrue. All in all, it can be difficult to determine what payouts would be, and if you were to die relatively soon after getting cover, the value of the payout is lower.

Let’s say your kids are still toddlers. Surely your spouse needs more help at this time? In 20 years, the policy is worth more, but there’s also less need for a death benefit, because you've had time to settle your affairs and your children are grown up.

What is Joint Life Insurance?

Joint life insurance covers two people, usually, a person and their partner. When one of them dies, the other receives the death benefit. Joint life insurance can run for a set term or be a form of whole life insurance with no set expiry and accruing value. The disadvantage of a joint life insurance policy is that after the first partner dies, the policy agreement ends. So, if you and your spouse hold a joint life insurance policy, the surviving partner receives benefits but no longer has life cover of their own.

Level vs Decreasing vs Increasing Term Life Insurance

Level life insurance is a form of fixed term insurance that provides the same payout no matter when the policy holder dies. It’s predictable, which makes it attractive, but there are arguments in favour of other types of term life insurance to consider.

Decreasing term life insurance means that over time, the death benefit decreases, although the premium remains constant. It’s generally cheaper than level life insurance and is a good choice if your primary goal is to ensure that your debts are discharged. Since your liabilities decrease over time as you pay them off, the decreased payout is justified and the saving on premiums might well be worthwhile.

Increasing term life insurance works in a similar way, but instead of paying out less as time goes on, it adjusts for inflation and pays out more. It also costs more.

Critical Illness and Children’s Cover: Are they Life Insurance?

Critical illness cover isn’t the same as life insurance. Instead, it pays out if you develop certain critical illnesses. The assumption is that it helps your family to cope when the insured person hasn’t died, but can no longer contribute to the household.

Children’s cover is similar.  You can’t get life insurance for children, but if you have children’s cover, you will get some financial assistance if your child develops certain illnesses and disabilities.

Neither of these types of cover are life insurance in the purest sense. Instead, they’re a type of health insurance.

How Does Terminal Illness Cover Work?

Terminal illness cover means that your family can receive insurance benefits before you die, but you must be able to prove that you’ll die within the next 12 to 18 months. Needless to say, that can be rather difficult to do. As you’d expect, this is not usually a type of insurance on its own. Instead, it’s an add-on to another insurance policy, usually a life insurance policy.

What’s Life Insurance in Trust?

If you’re not worried about your family having life insurance to pay off your debts, you can specify that the benefit goes into a trust fund to be used for specific purposes only.  It has the advantage that you can decide what the money should be used for, for example, your children’s education. On the downside, if your family finds itself in financial distress, they may not be able to access the funds.

How Does a Family Income Benefit Work?

An ordinary life insurance policy pays out death benefits in a lump sum. A family income benefit spreads the payment over a period, paying out the death benefit as a form of periodic income. Although this type of arrangement can have its advantages, you don’t really know what will happen to your family after you die, and they may find themselves regretting the lack of a lump sum.

How About Over 50s Life Insurance?

If you’re over 50 and still haven’t taken out life insurance, you can remedy the situation with an over-50s policy. Many of these policies don’t require medical checkups. However, these advantages come at a price. Because you’re older, you’ll pay higher premiums and your family can expect a lower payout than they’d get if you’d taken out life insurance sooner.

Which Life Insurance Policy Type is Right for You?

As a person with Type 2 diabetes, you’re reminded that life is finite. That’s not to say you can’t live out a healthy and active lifespan of perfectly normal duration, especially if you’re able to keep your weight and blood sugar levels under control. Nevertheless, your awareness of having dependents who might struggle without you is heightened.

So, you do the sensible thing and start shopping around for life insurance. Some insurers turn you down. Some offer you insurance, but with premiums that are extraordinarily high. Others expect you to provide all sorts of information and reports and then still charge you more than an ordinary person would expect.  What’s to be done?

You need a policy that’s tailored for you. One that acknowledges the efforts you’re making to remain well. Most of all, you want reasonable premiums and security for your family. Our team, which includes medical professionals that understand your challenges as a person with Type 2 diabetes, has the solutions you need. Find out more about unique and cost-effective life insurance for chronic conditions at Blueberry Life or apply today by filling in our simple online application form. Unsure about how much cover you need? Use our free cover calculator tool to help you calculate the level of cover you need for peace of mind.

This is a blog and should not be taken as financial advice.