Life Protection Insurance (LPI) is not required by law, but often means the difference between financial security and distress following the death of a family’s chief earner or sole provider. It is wise to take out LPI if:

• You have dependants who rely on you for income
• You have debts and loans that your family or dependants could not repay if you die
• You act as guarantor on a mortgage for someone

There are other factors to consider when choosing the scale of the life insurance policy you wish to take out. For example, if you have young children, they would be better covered if there was provision within the policy for the amount to last over a longer term. You should consider extra benefit if:

• You have loans
• You want to cover the cost of college education for your children

The length of time you want the cover to last is known as the ‘term’. With a young family to provide for, it is often desirable to have the insurance designed to last until the youngest child has left school or college. It may last as long as 25 years in the case of a young family, or 10 years if your family is older.
If you require cover that pays out regardless of when you die, you will need whole of life insurance. This is a fixed policy with a pre-agreed term and cover amount. You pay the same premium for the life of this policy unless you buy index-linked insurance, which increases cover in line with inflation each year. This takes into account the increased costs of living over a given period of time, allowing for a more meaningful payout to your dependants in the event of your death. Typically, your cover rises by between 3% and 5% to keep up with inflation. Many policies are index-linked automatically. If you do not want to take this optional extra, inform your insurance provider.