Life insurance Guide
Life insurance is suitable for most circumstances and can provide peace of mind that your dependants will be financially secure should the worst happen.
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Up to £100,000 of cover for as little as £3.88 *
- Synergy £3.88
- Aviva £5.00
- Friends Provident £5.00
*Rates based on a single 21 year old female non smoker details correct as of oct 2009
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DO YOU NEED IT?
Life insurance is designed to provide financial support for surviving dependants on the death of the policyholder. If you don't currently have any dependants who would be financial disadvantaged by your death then life insurance may not be a priority for you.
If you have a partner, a family or business partners who would suffer financially if you were to die, then life insurance should be considered to provide funds to clear any debts and/or provide a financial saftey net on your death.
TYPES OF LIFE INSURANCE
There are two basic types of plan to choose from:
Term Life Insurance
This is the cheapest option, and pays out only if the holder dies while the policy’s fixed-length term is in force. If the holder survives until the end of the term, they get nothing back. People often time their insurance to run only until a big family commitment – such as the children’s education, had been cleared.
Whole of Life Insurance
As the name suggests, these policies remain in force right through the buyers life. It follows that the insurance company will have to pay out in almost every case, and premiums are therefore higher than those charged on term life insurance plans. Some policies demand that premiums be paid all the way up to the holders death. Others become paid-up at a certain age, and waive premiums from that point onwards.
What Does The Cover Provide?
There are a number of different types of Term and Whole of Life Insurance plans on the market. The cover which is provided will depend on the type of plan taken out. The types of plans available are as follows:
Term Life Insurance
Level Term: The plans potential pay out remains the same for the full term of the policy. Decreasing Term: The level of cover gradually reduces over the policy term to match a reducing liability such as the amount left to repay on a mortgage loan. Increasing Term: Cover offered and premiums paid gradually increase in line with inflation. Designed to ensure the amount of cover purchased remains realistic and is not eroded by the effects of inflation over time.
Renewable Term: Allows plan holders to extend their cover for a further term with no health check.
Convertible Term: Allows holders to swap their term cover for a whole of life or endowment policy with no health check.
Family Income Benefit: Pays the surviving family a regular income instead of a lump sum for the remaining term of the policy.
Whole of Life Insurance
The majority of whole of life insurance policies are unit linked which means that premiums are invested into a fund and the cost of the protection is deducted from the fund as it grows. When a plan is taken out there is a choice of ‘Maximum’ or ‘Standard’ basis.
Maximum basis gives a very high level of cover for the monthly premium. Whilst this level of cover will be guaranteed for 10 years it is very likely that there will have to be an increase in premiums after each of the regular reviews. These usually take place after 10 years then after every 5 years.
Standard basis gives a lower level of cover for the premium, but is more likely that this level of cover and premium will stay the same throughout the policyholders life.
