The is the start of our life insurance explained guide and is designed to help explain the ins and outs of life policies such as term assurance, answering any questions you may have so you are able to make an informed decision when buying your life policy.
Summary of life insurance explained
Life insurance is designed to pay out either a single cash lump sum in the case of term assurance or in the case of a family income benefit a monthly income on death to help financially protect your loved ones.
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Life insurance is a very simple and affordable form of family protection. |
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It is designed to payout a tax-free lump sum to those left behind to help with financial obligations. |
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There is no maturity, if you outlive your policy there is no cash value the policy simply terminates |
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life insurance is limited to paying out on death only although there is the option to include a critical illness policy |
Do I need life insurance?
What would be the financial impact on your family if you were to pass away? Would your partner have enough earnings and savings to pay for the necessities and loan repayments? If not, then term insurance could be an effective way to protect their future.
Life insurance explained?
Life insurance is often referred to as term insurance. Life insurance is designed to pay out a tax-free sum to your family if the worst were to happen to you. Arranging a term assurance policy is a way of ensuring that your family is taken care of in the event of your death, providing them with a means to meet your outstanding financial obligations.
Life insurance comes in a variety of forms, all designed to meet different needs.
Term Assurance.Designed to cover you for a set time period, say 25 years after which the policy will terminate. The two main forms of term assurance are level term assurance where the level of cover remains fixed throughout the life of the policy and decreasing term insurance whereby the level of cover decreases over time to zero.
Family Income Benefit.A life product that instead of paying out a lump sum on death provides a monthly income to the end of the policy term.
Whole of Life Insurance.Exactly as it says, it is designed to cover you for the whole of your life and is not defined by a time period.
What can life insurance be used for?
Life insurance is used to financially protect your loved ones replacing lost income should the worst happen, covering your family’s financial obligations such as the mortgage or rent, credit card payments as well as everyday necessities. The sum received on claiming will depend on the level of cover insured, the type of policy and in some cases the length of time since the plan commenced.
Factors to consider when buying life insurance?
Set out below are a number of important factors to consider before buying your life policy. If you are unsure about any of these options and would like some life insurance advice please do not hesitate to contact us.
- What cash sum would your family require to meet financial
obligations should the worst happen? - For how long will cover be required?
- Do you want the life cover to remain fixed or decrease to zero over time?
- Do you want reviewable or guaranteed premiums?
- Do you want the policy be written into a trust? (see Life Insurance Trust)
- Do you want to include a critical illness policy with you life insurance?
More information regarding life insurance and it’s regulation can be found in the insurance section of the FSA money made clear website or at the Association of British Insurers.
