Life Insurance & Mortgage Protection
If the unthinkable were to happen, how would your loved ones cope?
- What is Life Insurance?
- Why do I need Life Insurance?
- What are the typical options available?
- How much will it cost?
- I already have Life Insurance
- Have your liabilities recently increased?
Life insurance (also known as ‘life assurance’ or ‘term assurance’) is a policy that pays out a lump sum in the event of the policyholder’s death, with the purpose of protecting loved ones and dependents against financial hardship.
Life insurance is usually available on a single or joint life basis with benefits including paying out on the diagnosis of a terminal illness. If the policyholder is alive when the policy expires no payment is made and, should the policyholder stop paying premiums at any stage, the policy will be cancelled and will have no value.
Most life insurance policies have optional extras, such as a waiver of premium. This means that the insurance company will pay your premiums to maintain the benefits under the policy if you become ill or injured and cannot work.
Critical illness cover can be included within life insurance policies. For more details on this type of cover please see our critical illness page.
No one likes to think about how our loved ones would cope should anything happen to us, but it’s important to make sure that they are protected should the worst happen.
While no amount of money can replace you, life insurance can help your loved ones to cope with financial burdens at what is already, a difficult time.
Among the reasons to take out life insurance are:
- Mortgage repayments – do you wish to arrange for your mortgage to be paid off?
- Replacing the main earner’s salary – ensuring the family does not fall on hard times after your death.
- Replacing childcare – the death of the main childcare provider could lead to the need for childcare expenses.
- Education expenses – cover for school/university fees after the death of the main earner.
Whether it’s about clearing your debts or ensuring your family can maintain the standard of living to which they were accustomed, it’s clear there are plenty of reasons to have life insurance in place.
What are the typical options available?
The main types of life insurance are listed below:
- Level term insurance – this is designed to pay out a lump sum if the policyholder should die during the policy’s term. The sum assured is guaranteed and remains unchanged throughout the term.
- Decreasing term life insurance (also known as mortgage protection cover) – this is usually a cheaper form of life cover. It is suitable for protecting a repayment mortgage, as the amount of cover will reduce broadly in line with the amount you owe on your mortgage.
- Renewable term insurance – offers the option to continue with the policy, on the expiry date, based on your age at that date but without the need for a health review.
- Convertible term insurance – offers the option to revert to a whole-of-life policy.
- Increasing term insurance – inflation decreases the value of money each year. This type of cover provides an escalating sum assured in order to keep up with inflation.
- Family income benefit - This type of insurance is slightly different because, instead of paying out a lump sum, the cover provides a tax-free annual income to dependents until the end of the term specified at the outset. It is usually a cheaper alternative to the options listed above.
- Whole-of-life insurance - This guarantees the payout of a lump sum when the policyholder dies, whenever that occurs, as long as payments are maintained. The premiums are usually guaranteed not to increase for the first ten years. However, they are more expensive as a claim is assured.
The cost of your life insurance will depend on several factors, such as the amount of cover you want and the length of the term.
Of course, it is also based on the likelihood of your insurer having to pay out. Thus, if you are a smoker with medical issues and work in a dangerous job, you will pay more than a healthy, non-smoking office worker.
The rates quoted below are typical non-smokers rates, with no medical conditions, based on a fixed term of 20 years. The monthly premiums are guaranteed and will NOT increase.
All rates quoted above were obtained on 27th October 2009.
For further information and to obtain a FREE, personalised quotation please contact us.
The cost of life insurance has become very competitive over the past few years.
If you set up your cover a while ago why not take advantage of obtaining a quote from us and see if you can reduce what you currently pay.
As we are Independent Financial Advisers we will research the whole of the market to obtain the lowest cost suited to your circumstances.
Have your liabilities recently increased?
Keeping the amount of life insurance required in line with your liabilities is extremely important, yet many people forget to increase their life insurance, for example, when re-mortgaging.
For further information and to obtain a FREE, personalised quotation please contact us.
Independent Financial Advisers Authorised and Regulated by the Financial Services Authority.
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