Life Insurance

Life Assurance is an insurance policy which will pay your family a lump sum payment upon your death.

It is normally used to ensure that in the event of your death, your family can pay off any mortgages or liabilities you may have had, cover funeral expenses, maintain a similar standard of living or simply to leave a sum of money behind after you have died.

What would happen to your family in the event that you were suddenly killed tomorrow on your way to work? Could your family continue to live their lives to a similar standard? Could they keep the roof over their head that you worked so hard to provide?

If you have a family or partner who is financially dependent on you or if you have major liabilities such as a mortgage or loan, then getting a Life Insurance quote is a must to protect their way of life.

Life Insurance itself comes under many names but essentially they are all the same. They all aim to provide a tax free cash lump sum in the event of your death in exchange for a monthly premium paid to the insurance company.

The exact amount of cover will vary depending on your needs but will generally be enough to pay off your mortgage and to cover other liabilities. You may decide to add a little extra to your cover, to relieve the financial burden from losing a wage earning member of the family or you may decide to simply remove the biggest burden of the mortgage.

Either way, the options are available and can be tailored to suit your needs and wishes.

There are two major types of Life Insurance depending on your circumstances:

Level Term Life Insurance: With a level cover the amount you choose to protect is guaranteed to remain the same throughout the policy. It won't reduce over time and if your family needs to claim on the policy, it will pay out the full level of cover. This type of cover is often used to protect interest only mortgages or loans, or for family protection.

Decreasing Life Insurance/Mortgage Life Insurance: With decreasing or mortgage life insurance, the amount of cover you choose will decrease over time throughout the full term of the policy. This is most suited to Capital and Repayment mortgages, this is not suitable for interest only mortgages

As with all things in life, various other options also exist for your life insurance. For instance perhaps you do not wish to leave a lump sum for your family, but would rather leave a monthly benefit for your family for a number of years. This option is well suited for those with children in private education, who wish to ensure that in the event of death, their children’s education fees could still be paid.

Types of Life Insurance

Life Assurance is a varied and flexible product and as such can come under a number of different names.

What is Terminal Illness Cover?

Policies do however include something called 'Terminal Illness Cover' which will allow, at the insurance companies discretion, a payout of your policy early if you
are diagnosed with a terminal illness where you will die within 12 months. This is offered as a goodwill gesture by the insurance companies to allow you the
opportunity to settle your affairs and make your own arrangements before you die.

It is important to understand that this is not the same as Critical Illness Cover and will only be offered for conditions where your doctor has told you that you will
die within 12 months.

Can I get Life and Critical Illness cover together?

Taking Life and Critical Illness Cover together can provide a great method of ensuring you are fully protected against the eventualities of death and contracting a
critical illness such as a heart attack or stroke. It can also serve to reduce Critical Illness premiums compared to taking a Life Assurance and Critical Illness Cover
separately.

Can I protect my Policy against Inflation?

Your policy can include an option called index linking which allows it to increase on an annual basis to offset the effects of the year’s inflation and increases in the
retail price index. This is important because as time goes by the real time value of your payout will decrease. That is to say that what you can buy for £100,000
today will not be the same in ten years time. Index linking your Life Assurance policy will allow it to maintain that value.

What are the benefits of writing my Policy in Trust?

At the time of your death your family will obviously be upset and whilst thinking about your insurance payout will probably not be the first thing they want to think about, it may be necessary to cover your funeral expenses or pay off your mortgage. As such it is important that the process for ensuring your family is paid quickly is in place.
Normally your life insurance payout would be paid into your estate and left to the process of probate to decide how it should be divided up and used. Unfortunately probate can be a lengthy process (at times up to 6 months) especially if your will is contested. One way to avoid the probate procedure for your life assurance is by having your policy written into trust. Writing your policy into a trust allows you to nominate to whom the payout should be made, meaning that it is paid by the insurance company much faster to exactly who you intended it to go to. As an added benefit, writing your Life Cover policy into trust can also help to limit the effects of inheritance tax on your estate because the payout would no longer form part of the estate.