Life Assurance
There are many forms of life assurance, some of which are mentioned in the adjoining pages to this section. Choosing the right one for you can depend upon a number of factors including tax, cost and the protection required.
You can use the information and tools on this site to gain a basic understanding of what is available. However this information is only an overview. Only expert, independent advice following a full review of your circumstances will ensure you find a solution that provides peace of mind.
Life assurance can be used to protect income, loved ones and businesses and, in certain circumstances, can be arranged in such a way as to minimise the effect of tax. (Tax treatment is based on individual circumstances and may be subject to change in the future.)
Term Assurance
Term insurance is the cheapest - and simplest - form of life insurance. You insure yourself for a set term - until a loan is paid off, for example. It doesn't contain any investment element - it simply promises to pay out if you die on the first day of the policy, you get exactly the same sum as you would if you died near the end of the policy.
Term policies can either be level or decreasing. A level policy simply means the sum assured remains level throughout the term of the policy. If you die on the first day of the policy, you get exactly the same sum as you would if you died near the end of the policy. A decreasing term assurance policy on the other hand, will pay out more at the beginning of the policy than it would at the end.
The way a term policy pays out can also come in one of two ways. Those that pay out a tax-free lump sum on death and those that pay a tax-free income to the end of the term, known as family income benefit policies. As usual there are pros and cons to both, a lump-sum policy can be more flexible because it allows your family to have a mixture of lump sum and income upon your death. A family income policy on the other hand is often cheaper because the liability is always decreasing for the insurer, for example, if you die in the 18th year of a 20-year policy, the insurers would only have to pay income for two years. It's also easier to work out the level of cover with this type of policy because you simply work out the income you would need to replace.
Mortgage Protection
Mortgage Protection is a kind of Term Assurance specifically designed to repay, on death, during the term, the amount outstanding on a 'capital and interest' repayment mortgage. In other words, if the policyholder(s) die prematurely, the outstanding loan amount on the mortgage will be repaid in full.
Some policies have benefits, which are extra sorts of cover, added on to the principal life cover. Such benefits include:
- Waiver of premium benefit - the premiums are in effect paid for you in the event of defined incapacity due to illness
- Income protection benefit - a percentage of your income is paid to you if you cannot work at your usual employment
- Unemployment Cover - a variety of income protection benefit
- ** Critical illness cover - The lump sum benefit is paid in the event of one or more of the specifed illnesses being diagnosed after a specified survival period.
All these additional benefits cost extra and are only paid subject to meeting tight criteria.
The plan will have no cash in value at any time and will cease at the end of the term. If premiums are not maintained, then cover will lapse. ** The policy may not cover all the definitions of a critical illness. For definitions please refer to the key features and policy document.
