protect your family finances
Life insurance comes in several forms. Mortgage protection, or decreasing term assurance, to give it its proper title, is a policy that homeowners typically use to protect a mortgage balance. Another type of term assurance is level term. Unlike decreasing term, level term will pay a fixed amount if the policyholder dies. Family income benefit, another type of term assurance pays a monthly benefit rather than a lump sum and can be a cost effective alternative. Whole of life insurance is a type of policy that runs for life rather than a term. As the policy is designed to definitively pay out, it is more expensive but is a useful financial planning tool, especially to cover inheritance tax liability.
Mortgage protection
Decreasing term assurance is a type of policy designed to cover a mortgage debt.
The amount of cover reduces as your mortgage balance decreases. The premium remains the same throughout the term of the policy unless you increase the level of cover.
Term assurance
Level term assurance is a popular type of life insurance, generally used to leave a legacy sum for family. This insurance pays out a lump sum if you die during the term of the policy. Unlike decreasing term assurance, the payout/benefit amount remains the same throughout the policy. You can also choose to have the amount of cover increase each year-obviously this increases the monthly premium.
Whole of life insurance
Whole of life insurance is a special type of life cover and there are different ways it can be set up, depending on your circumstances. This type of cover does not have a fixed term, it runs to death of the policyholder. It is used to provide a legacy sum for family and also as a key tool for inheritance tax planning.
Family income benefit
Family income benefit is a type of life insurance that pays out a monthly benefit rather than a lump sum. This can make it a useful financial planning tool to provide cover that is proportionate to the anticipated need. A common use of family income benefit is to cover expenses associated with raising a family. Parents could for example take out a policy that runs to a child’s 23rd birthday with the monthly benefit amount enough to cover school/university costs and expenses such as driving lessons. In the event of death of the policyholder, the policy pays the monthly benefit to the end of the term.
Guaranteed Insurability Option
A guaranteed insurability option, GIO. is a valuable feature in terms of insurance. Having this option with your plan allows you to make certain changes to the plan for example an increase in pay, taking a larger mortgage or getting married.
Whole of market protection advice
After a comprehensive search of cover and providers, the recommendation will be tailored to your specific requirements. I research all of the main UK providers.
Application
You are not alone to make the application. I will apply for the policy with you and talk through the underwriting questions to ensure accurate information.
Underwriting
Life insurance underwritten at application. This means it accounts for any pre-existing medical conditions and your current lifestyle and BMI. Pure protection policies cannot be cancelled by the insurer for changes to health or lifestyle-providing you pay the premiums.
An age costed income protection policy is typically a low start policy. The premiums are low to start with but increase each year with your age as well as increase due to increased cover. Generally a useful option for young people where budget is key. However, bear in mind that the cost of the cover increases with age and the cost of switching to a none age costed policy further down the line will also be higher.
Life With Critical Illness
Life insurance can also be taken out to include critical illness cover. This means the policy would pay out on death or if the policyholder is diagnosed with a covered critical illness during the policy term.
Other Types Of Insurance
Critical Illness Cover
Critical illness cover is an insurance that pays out a lump sum if you are diagnosed with a covered condition. Generally speaking, most providers cover up to 60 illnesses. People use these funds for various reasons, including making home adaptations, lifestyle choices such as family holidays or to cover daily expenses.
Some policies also offer serious illness cover. This type of policy pays out a percentage of your cover amount for less serious conditions. There are options to have up to 3 times the benefit amount covered and 178 different conditions.
Family Income Benefit
Family income benefit is a type of life insurance that pays out a monthly income rather than a lump sum. It is generally less expensive than lump sum life assurance and can also be used to provide critical illness cover.
A key use of Family income benefit is to provide an income for children in the event of your death. Parents typically run a policy to their child’s 23rd birthday with a benefit amount that would pay school fees, university costs, driving lessons, the associated costs of “raising kids”. As the payout amount is less the closer the policy is to end date, the monthly premium is lower.