A lump sum for your loved ones
Life insurance pays out a lump sum to who you specify, should you pass away during the term of the policy. The cost of a life insurance policy is decided by a set of criteria, including your health, age, occupation, lifestyle and many other factors. Compared to many other types of policies, this is usually the cheapest way to give financial protection to your family, should you prematurely pass away.
- Guarantee regular financial income for your family
- Clear your debts and pay off your mortgage (see mortgage protection)
- Cover any unforeseen expenses
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Why should you take out a life insurance policy?
Dealing with the loss of a loved one is difficult to start with and adding financial worries for your family can make their grief even more difficult. A lump sum payment can help your family or perhaps a business partner after you die. Some of the reasons to take out life insurance could include:
- Clear your debts and pay off your mortgage
- Guarantee regular financial income for your family, ensuring your family don’t suffer financially after your death
- Childcare costs – Should the main childcare provider die, the need for childcare expenses to be covered may arise
- Education costs – covering school or university fees after the death of the breadwinner
There are many reasons to ensure your family can maintain their standard of living.
Types of Life Insurance policy?
Level Term
Level term assurance provides a payout if you die or you are diagnosed as having a terminal illness during the term of the policy. If you live beyond the term, the policy will expire and no policy payment will be made. Also, should you stop paying the policy premiums at any time, your cover will stop. Although there are some insurance policies that provide a waiver of premium, that ensures the policy will remain in place under specific circumstances, such as disability.
Decreasing Term Assurance
The lump sum payout that decreases over time. It is often used to protect repayments of reducing debts – such as repayment mortgages, loans and school tuition fees.
Convertible Term Assurance
The assured sum remains the same for the full term of your policy. For an additional cost you will have the choice to transfer this original plan, or a part of it, to another policy type such as an increasing term assurance, a whole of life policy or an endowment, without the need for further medical evidence being needed. If you stop paying the premiums during the term, your cover will stop.
Family Income Benefit
Family Income Benefit (FIB) offers a regular tax free income that is paid for the remaining term of the policy, should you die. Family Income Benefit may offer a replacement income and may be index-linked to inflation, so your policy cover stays the same. If you survive to the end of the term, your policy will expire and no payment will be made. Similarly, if you stop paying your premiums at any time, your cover will stop.
Death in Service Benefit
Death in service benefit is provided by an employer to employees. If you die whilst employed, the policy usually pays between 2 and 4 times your annual salary. This is a very useful boost to your own life assurance arrangements. However, remember to review your life cover if your lifestyle ever changes or you switch jobs.
