Life Insurance

Simply an arrangement, i.e. an insurance policy, that pays out a benefit, usually a cash lump sum but sometimes a regular income, on the death of the person whose life is covered.

The benefit will sometimes be paid to the person who took out the policy - it's common for a policy to be taken out for a spouse or partner. Otherwise, on occasions a policy will be "held in Trust", for example for the benefit of children or grandchildren, so that the benefit will be paid direct into the Trust - this is common where a policy has been taken out to cover a possible Inheritance Tax liability. Sometimes a company will take out life assurance cover on the life of a key employee. If no formal arrangements have been made, and if the person has taken out a policy on their own life, the proceeds will just be paid into the Estate. Life assurance cover is paid for through premiums, usually paid monthly. The level of premiums will depend upon the amount and term of cover, the type of policy and the state of health of the person covered (smokers attract higher premiums!)

There are various different types of policies available and numerous insurance companies that specialise in this field.

Term Insurance This type of policy runs for a specified time period with the following options usually available: -

Level Term Insurance In this form a policy will pay out a fixed sum on death during the term. At the end of the term the policy ceases with no maturity value. Nor does it acquire a surrender value.

Convertible Term Insurance These policies allow conversion, without further medical evidence, to a different type of policy from an insurance company's range. These may include whole of life, endowment, a further term, unit linked or family income benefit.

Increasing Term Insurance Under this option, the benefit payable on death increases (usually annually) and is particularly useful to avoid the sum assured being eroded by inflation.

Renewable Increasable Convertible Term Insurance This contract combines the options of increasing the sum assured, converting the policy and renewing the contract. Policies are usually arranged on a five or ten year basis initially.

Decreasing Term Insurance The sum assured decreases each year throughout the term of the policy and this type of policy is especially suitable to protect a repayment mortgage.

Family Income Benefit These policies provide a regular tax-free income to assist the remaining members of the family. As an income replacement, it is important to protect the benefits from the effects of inflation by having the benefits index linked.

Whole of Life Assurance Unlike term insurance, where the policy runs for a fixed term, a whole of life policy is open-ended. There are various reasons for using a whole of life policy, although they may prove more expensive than the term insurance option. As they are arranged on a Reviewable basis, the premiums can sometimes increase in later years along with the age of the assured.

Keyman Insurance This provides a more flexible alternative to term insurance generally written on a non-qualifying basis in a corporate situation. Most insurance companies offer policies that can be extended to include not only life insurance but also critical illness insurance. Most insurance companies will offer a policy whereby the cover provided increases, normally in line with the Retail Price Index, to prevent the real value of the cover being eroded by inflation. It is important to remember that not all life insurance policies are the same. With this in mind, expert advice and guidance is strongly recommended. Please complete our online enquiry form and we’ll arrange for an independent protection specialist to contact you to discuss you individual circumstances. They will the source the whole market to provide you with the most cost effective and appropriate plan to suit your circumstances.