Summary
A thorough and succinct introduction to life insurance policies. The article explains all the key terms and what type of cover various insurance policies provide.
Life insurance can help your family to be financially secure in the event of your death. When you purchase decide the cash value you want the plan to pay out when you pass away – this money is called the sum insured”. The monthly premium paid is based on this sum insured, and on your age and gender.
Your monthly payments will also be based on the type of insurance policy you need. There are two simple types of life insurance: level term insurance and decreasing term life assurance plus many variation s within these types.
Term insurance 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 insured term, you will not get anything repaid. It is a simple insurance with no investmet element. It protects your family by paying a lump sum should you die within the time covered by your insurance policy.
There are two basic types of term assurance. Level term gives the same payout during the entire life of the insurance cover which means that you beneficiaries would receive the same amount whether you died on the last or first day of the policy. Level Term cover is usually bought with an interest-only mortgage, where the fulldebthas to be repaid in full on the final day of the mortgage term.
Decreasing term cover is where the cash paid out reduces by a set amount each year, finishing at nothing at the end of the term. Since the amount of insurance reduces during the term, premiums on decreasing insurance are cheaper than on level term policies. This cover is usually only taken out with repayment mortgages, where the outstanding mortgage reduces during the term of the mortage.
There is also a type known as increasing term assurance. Some insurance companies call it index linked insurance. This means that the potential payoutrises by a tiny amount each year in line with inflation. It is a good way of protecting the buying power of the sum you have insured for.
With convertible term assurance, the policyholder has the option of switching to another type of life policy – for instance a “whole of life”. If a person does take up this possibility, they do not have to submit any additional medical investigations.
If you chose a type of insurance called family income benefit your family would receive a tax free monthly income if you were to die and this income would continue until the policy reached its termination date. This gives your dependents monthly cash payments from the date the policyholder died to the end of the policy’s term.
Life insurance can be aquired on the internet or from the high street through brokers, banks, insurance companies, from some friendly societies. Some 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 sex, your age and the sum you want to insure for. Some insurers insist on a medical before offering cover, but this is not so common as in time gone by. Prices for life insurance can alter over time and if you do have an existing plan it might be worth shopping around to find out if you can get a cheaper deal. You can normally finish your existing plan without penalty – but make sureyou have another plan in place before you cancel your existing policy.
If you decide to search for cheap life cover, you can’t do better than go online. That’s where your sure to better your premium.
