Summary
A thorough and succinct guide to life cover. The article explains all the key words the life industry usesand what type of cover various policies provide.
Life insurance can help your family to be financially secure after you die. When you life insurance you stipulate the value you want the policy to pay out when you pass away – this money is called “the sum assured”. The amount you pay each month is based on this assured sum, and on your age and gender. That’s why you need to find the cheapest life cover quotes and quotes for better life insurance.
Your monthly payments will also be based on the type of cover you choose. There are two fundamental types of life insurance: level term insurance and decreasing term insurance plus many variation s within these categories.
Term life assurance is often purchased at the same time as a mortgage and should cover the same period as the mortage. If you haven’t died at the end of the period, you will not get any money returned. It is a simple insurance with no aspect of investment. It can protect your family by paying out a lump sum should you die within the period of time covered by your insurance.
There are two basic types of term assurance. Level term life insurance gives a fixed level of payout during the entire life of the cover which means that you beneficiaries would receive the same amount whether you died on the first or last day of the policy. It is usually bought with an interest-only mortgage, where the full capital has to be repaid on the final day of the mortgage.
Decreasing term assurance is where the cash to be paid out reduces by a fixed figure each year, finishing at zero at the end of the term. Since the level of insurance cover reduces during the term, premiums on this kind of insurance are cheaper than for level termpolicies. This cover is usually only taken out with repayment mortgages, where the outstanding capital reduces during the term of the mortage.
There is also a type known as increasing term insurance. Sometimes it is known as index linked insurance. This means that the payout sum increases by just a small sum annually in line with inflation. Increasing term insurance is a good way of protecting the buying power of the sum you have insured for.
With convertible term insurance, the policyholder has the choice of switching to another type of life cover – for instance a “whole of life”. If a person does take up this option, they do not have to submit any more medical investigations.
If you want your family to receive a monthly tax free income in the event of your death, you need a type of insurance called family income benefit. This gives the policyholder’s dependents monthly payments from the date the policyholder dies to the end of the policy’s term.
Life cover can be aquired on-line or from the high street through brokers, insurance companies, banks or from some friendly societies. Most sell directly to the public. Other outlets selling insurance include comparison websites and mortgage brokers.
Factors affecting monthly premiums include the whether or not you smoke, your age, sex and the insured sum. Some companies insist on a medical before offering cover, but this is not as common as in time gone by.
Life insurance prices alter over time and if you already have a plan it can be well worth shopping around to find out if you can get a much cheaper deal. You can usually stop your existing insurance plan without penalty – but always make sureyou have another one in place before you do so.