life insurance cover

Life Insurance

This is an insurance policy that an individual takes out against their life. They will normally pay monthly over a certain period of time. This insurance is mainly to protect their family in the event of their death.

Life insurance is often more commonly known as term assurance. This is because it will run for a specified “term” such as 25 years (such as to protect a mortgage). It is possible to select any term for the insurance from one year upwards. There are however, limitations due to the age of the policyholder. For example, the nearer to 70 years old they are the lower the term insurable.

Term assurance is also the cheapest form of life assurance you can buy, and can be used for Mortgage Protection, Family Protection and Personal Protection. These policies do not have any investment or “cash in” value at any time. If there has not been a claim made against the policy by the time it expires, then the policy will lapse.

There are two d ifferent types of term insurance available. These are ‘level’ - where a lump sum is payable on the event of death. This amount remains constant throughout the period of the life insurance term. This is the most common form of life insurance and ' decreasing' – where a lump sum is payable on the event of death. This lump sum decreases by a fixed amount during the period of the term, decreasing to nil by the end of the insured period. This form of cover is normally used for mortgages or other loans where the amount owed decreases each year.

There are both single and joint life plans available from insurance companies. The single life plan insures one life and the joint life plan insures two lives but only pays on the first death. This is not really a good insurance to have if you have other dependants as if both insured die together, then only payment for one death will be received.

With all Life insurance plans, a monthly premium will need to be paid; this could be over a number of years or for life. These premiums will depend on the sum to be insured, the period of insurance cover, your age, your sex and whether you smoke or not. A non smoker is usually defined as someone who has not smoked for at least twelve months. Premiums for women are generally lower as on average they tend to live longer. Additional options can be added to increase the level of cover, but this will increase the premiums. A few pounds per month can provide cover for a payout of tens of thousands of pounds. You are covered for as long as you pay the monthly premiums. If you stop paying the premiums, the policy terminates.

Most insurance companies also include terminal illness cover free of charge. This will pay out the sum assured to the policy holder upon diagnosis of a terminal illness during the term of the policy (although not usually during the remaining few months of the term of the policy – it will still pay out on death). The company will list any illnesses that are covered and not covered within the insurance, so the policy holder can clearly see what is included.
Medicals are not normally required, although in some circumstances a report may be required from your doctor. You should always complete any life insurance application honestly as failure to do so will result in the insurer refusing to pay on the event of death.

Another form of life insurance is “whole life insurance”. This insurance covers the insured for the whole of their life. The sum insured is paid to the dependents on the insured’s death. This insurance is generally more expensive as it is certain that the insurance company will need to pay the sum insured.

This policy has two types of cover, Maximum cover where initial premiums and the sum insured are guaranteed not to increase for the first 10 years. After this initial period the plan is reviewed and if necessary the premiums may be increased and balanced cover where the cover aims to balance the level of life insurance with enough investment to support the cover in later years and maintain the original premium throughout life.