What Is Life Insurance and what does it do ? (uk). Page 2Term life insurance cover can be further categorised into these types: Hot Topics
Decreasing (or mortgage protection insurance) cover - cover decreases over the term of the policy, often inline with a diminishing mortgage debt. Family income benefit - pays out a regular income rather than a lump sum during the policy term. Increasing term assurance - premiums and ( loans ) benefits increase each year, usually in line with inflation, allowing the protection of a lifestyle. Convertible term assurance - gives the option to convert to a whole of life policy ( cheap life insurance ) without giving new information about your health. How much cover do I need? It's important to correctly identify your dependants' financial needs to establish just how much life insurance cover to arrange. A general rule is to choose a policy providing at least ten times your salary, but more may be appropriate, with the amount varying depending on how you intend it to be used. Basically you decide how much you want your dependants to receive in the event of your death, and your premiums will be determined accordingly. Don't overlook factors like: . Mortgage repayments . Replacing the primary earner's salary . Replacing childcare . Education expenses . Outstanding debts . Support for a business partner What do I need to look out for? Before signing anything, look carefully at the terms and conditions of your proposed life insurance policy giving particular attention to any regulations pertaining to payouts. Some policies may not, for example, pay out if death is caused by participation in certain dangerous sports or activities. In the case of index-linked policies which allow for economic change, it's important to establish whether the policy is linked automatically or whether there's the need to opt-in to linkage each year; failure to do so could result in being locked out of future linking. Though life insurance payouts are usually tax-free, there are circumstances where taxes will apply. A life insurance policy can be placed 'in trust' to protect revenue and provide payment more quickly, though this is a complex issue which needs professional advice for clarity before proceeding. A joint-life policy is a popular and often less expensive option for couples which covers the two of them simultaneously, with options for payout on a first-death or last-survivor basis. How much will it cost? The cost of each different policy offered by a life insurance company varies widely, and depends on a number of factors: the type of policy, the length of the policy term, the size of the death benefit, the flexibility of the policy, number of people covered by the policy and so on. The only certainty is that the longer you delay getting life insurance, the more expensive the premiums will be! |
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