Life Insurance

Life Assurance is an affordable way to protect your family’s lifestyle and give them a secure future if you’re no longer around. However,  cheap Life Cover often isn’t  the best Life Cover! Our Independent Advice will guide you to the right solution for your needs.

You can choose the level of  life cover required. If you die, your life assurance policy will pay out a lump sum or regular income for the amount you insure yourself for.

Term Assurance

This is the most common form of life insurance and the concept is relatively simple. You insure your life for a set number of years (a term) and usually for a set amount of money. Therefore, should the worst happen and you die before the end of the term, you can be confident that your beneficiaries will receive some money to help them pay off the mortgage, pay off debts and so on. If you survive until the end of the term, you’ll receive no payout. If you cancel, these policies will cease. During or at the end of the term, there is no cash-in value.

Types of term assurance

Level Term Assurance

Being ‘level’ the sum assured (the amount paid out if you die) won’t change during the lifetime of the policy and neither should your premiums . You will specify how much cover you want and for how long. The premiums, if the policy is arranged correctly,  are set for the lifetime of the policy.

Who does it suit?
People who want to protect fixed debts that will have to repay a fixed lump sum at the end of their mortgage term, such as interest-only mortgages.

Decreasing Term Assurance

Also known as Mortgage Protection insurance. With Decreasing Term insurance, the premiums you pay remain the same, but the cover reduces slowly during the term of your policy, dropping off steeply at the end. You specify how long you want the life insurance policy for and the starting sum assured (the amount your dependants receive if you die).

Who does it suit?
Typically, Decreasing term policies are taken out by people on repayment mortgages, as they pay off capital and interest over the mortgage term, reducing the amount owed over time, until it reaches zero. Your decreasing term insurance policy will gradually reduce at the same pace.

Premiums on these policies tend to be cheaper than Level term protection.

Convertible Term Assurance

When the original policy term ends, with Convertible Term Assurance you have the option to convert a policy into a Whole of Life assurance policy or an Endowment policy. The advantage is you cannot be refused a policy, regardless of your current health status at the time of conversion. However, when converting, you cannot increase the sum assured and you must do it before the term of your existing policy ends.

The costs to convert make this a slightly more costly option, with premiums averaging 10% more than basic Level term insurance. Premiums at conversion stage are set by age and gender.

Escalating Term Assurance

With these policies, the sums insured are lower when you are younger, but rise over time. Premiums ‘escalate’ in line with the sum insured increases.

Family Income Benefit

Family Income Benefit insurance is taken out for a set term. If you were to die during this time, instead of paying a lump sum, it will pay your dependants an agreed tax-free income until the policy term expires.

You will specify the level of income you want your family to receive tax-free, possibly equivalent to your monthly salary, and how long you want protection for. Policies are usually written on a joint basis, with the surviving spouse or partner benefiting. If you die with one year of the policy remaining then the policy will pay the set monthly income for one year.

Who does it suit?
It suits families with young dependent children, to reflect the financial commitments until they’re self-sufficient. A regular income rather than lump sum may alleviate the pressure of apportioning money for the remaining term for the surviving partner.