Life Insurance

Life Insurance is designed to pay out an agreed amount of money upon the death of the life insured. The money does not have to be associated to a loan but can be used to pay out a lump sum that can be passed on to the family. The payment is made tax free and has no investment element to it and is a cost effective way of protection because of this. Life assurance is essential to ensure that a family’s standard of living is not affected if a key member of the family dies.

It is essential to shop around for life insurance as premiums and cover differ with each insurer. There are a lot of variations that can be made to a policy that can save you money, increase benefits and provide you with long term security. It is worth using a whole of market advisor to guide you through the process to ensure that you are getting the most comprehensive cover for the cheapest price.

Life insurance options

Joint or Single

Life assurance can be taken out on a joint or single life basis. If you take out a mortgage and you require your mortgage to be paid off then a joint policy is often used. What this means is that if Mr and Mrs took out the policy which was enough to cover their mortgage then if one of them dies the policy would pay out and the mortgage would be covered. After which the policy would cease. It is however worth looking at the cost of two single policies as there is not usually a huge difference in cost for double the cover. This means that if Mr died then Mrs policy would still be in place and would payout on her death and would be left to the family.

Level Term assurance or decreasing

Life assurance is taken out over a set term although some policies have options to increase this. A decreasing assurance known as mortgage protection insurance is designed to cover a repayment mortgage. The term and amount of the insurance should cover that of the mortgage so it decreases along with the mortgage to ensure that it is paid off. This is often cheaper than a level insurance. A level term assurance will remain the same throughout the term and is often linked to an interest only mortgage. As the balance of the mortgage is not going down the life insurance shouldn’t either to ensure that the mortgage is paid off. Level term assurance is also used for family protection. Family protection is designed to payout a sum of money to protect the family after the death. Maybe to pay funeral costs, to replace lost income or to provide a cushion through difficult times. This is often taken out on a level term basis so that the family can be secure in knowing that an exact amount will be paid out on death.

Family Income benefit

Family income benefit works in a similar way to level term insurance but it pays out a tax free monthly benefit to the dependants for the term of the policy.

Critical illness assurance

Critical illness assurance or critical illness cover makes a payment when the policy holder is diagnosed with a critical illness listed on the policy. Critical illness can be taken out on its own or as part of a life insurance policy. Many insurers differ in what critical illnesses are covered so please seek advice on this. Also often life cover with critical illness attached to it is often around the same price as standalone critical illness. Please also be aware of what critical illnesses are being covered in the policies which are featured in the documents that are presented before a policy is taken out.

Waiver of Premium

Many policies offer the facility to protect your premium payments if you are off work for a specific amount of time which can be useful to ensure that your insurance is not sacrificed due to you being off work.

Level premiums or guaranteed premiums

Life and critical illness policies have two choices of premium guaranteed or reviewable. Guaranteed means that the premium will remain the same throughout the policy and reviewable means that the polices premium will be reviewed after 5 years and maybe subject to change.

The Importance Of life Insurance