Life Assurance
Life assurance is required for many different reasons from protecting your family, repaying your mortgage or covering your business.
There are several main types of life cover, the most common being Whole of Life and Term assurance. Identifying the most suitable one for you depends upon several factors including the period of risk, cost and the protection required.
Term Assurance is the cheapest and simplest form of life assurance. It will pay a lump sum if you die during the term of the policy. At the end of the term the plan will generally finish although some provide a renewable option. It does not contain any investment element but simply pays out if you die during the term of the policy. If you do not die during the policy term, you would receive nothing.
Family Income Benefit is a form of term assurance that will pay a regular amount of money in the event of a claim, usually on a monthly or quarterly basis for the remaining term of the plan following death. This type of plan is particularly useful when childcare or educational costs still need to be met following death.
Cover can be set up on a level or decreasing basis where level cover maintains the same sum assured throughout the term of the policy whereas with a decreasing sum assured, the cover will reduce during the term of the policy. This may be best suited to protect a mortgage for example.
Whole of Life policies are designed to provide life cover throughout an individual’s life. They often contain a savings element which is built in to build up in the early years to try to subsidise the increasing cost as the life assured grows older. These premiums are guaranteed for the first 10 years and are then reviewed every 5 years. Alternatively, a guaranteed version of this plan is available which does not build any savings.
The following features are available under both of the above types of plan;
-
The level of protection can be increased/decreased, subject to certain conditions to fit your circumstances and the plan can be set up with a variety of premium payment options to fit most budgets.
-
It will pay a lump sum when you die.
-
The plan may be written in Trust to ensure the proceeds are paid to the right person and to help reduce any potential Inheritance Tax implications.
The actual level of cover required depends upon your personal circumstances such as marital status, dependents, age, continuing income, etc. This would normally be calculated on an individual basis.