Questions such as, do I need life insurance? What type of life insurance policy is best for me? How does life insurance benefit me? How does life insurance benefit my family or my partner? What are the different levels of critical illness cover available? I am diabetic?
Firstly we will break down the different types of insurance cover available, such as over 50s life insurance.
To begin with there is Term Assurance . This is where you take out insurance cover over a set period of time, and where you are guaranteed an insurance payout should you need to do an insurance claim within that time period. For example if you take out a twenty year insurance policy, should you claim within the first year of your insurance cover, or the twentieth year, you will receive the relative sum to which you have been insured.
There are in fact two types of term assurance, the first being level term assurance, and the second being decreasing term assurance. We will now distinguish between the two.
Level term assurance is a very straight forward product. You take an insurance policy out over a set period of time (lets say twenty years), and you do this to the value of £100,000. Should you claim on the policy at any time within the twenty years, you will receive a guaranteed payout to the value of £100,000. As you can see it is a very straight forward life insurance policy. The majority of people who take out these insurance policies are either looking to leave the money behind to loved ones, or to cover an interest only mortgage.
Decreasing term assurance is more commonly chosen by people with repayment mortgages. If we use the same example as above - a twenty year policy at a value of £100,000. The difference between these two policies is in the payout. The payout on a decreasing term policy reduces over the term of the policy, mirroring the outstanding amount on your mortgage. For instance, if you claim on a decreasing term policy within the first year you will be likely to receive a payout similar to the initial sum assured, i.e. £100,000. However if you were to claim on the policy within the twentieth year you would receive a payout of approximately £5,000; the amount remaining to pay off your mortgage. As you can see the risk for the insurance company reduces as the years go by, and this in turn is reflected in the price of the policies. A decreasing term policy will be cheaper than a level term policy, for the same value and term.
Both of these types of policy tend to come with free terminal illness cover, not to be confused with critical illness cover. Critical illness cover varies considerably depending on which company you choose. We would recommend you seek assistance from one of our consultants before making a decision on which critical illness policy to take out. They can also assist you with the decision of whether or not to put your insurance policy into Trust. Terminal illness cover on the other hand can be summed up quite simply. Should you for any reason be given less than a year to live by your GP, you can then make your claim once your condition has been diagnosed.
