Life insurance
In this document:- Why do you need it?
- How much do you need?
- How much will it cost?
- Types of life insurance
- Frequently asked questions
- Can I receive a refund of my Life Assurance premiums if I haven't needed to make a claim?
- How long does the Term of the Life Assurance Policy have to be?
- Is it cheaper to have a joint Life Policy or two separate Life Policies?
- What is the average sum assured?
- What is Terminal Illness benefit?
- Should I make a will?
Why do you need it?
- To protect your mortgage
- To give your family an income if you die
- To allow your business to carry on if you die
- To cover potential inheritance tax
How much do you need?
Life insurance is a complicated subject. You will probably fall into one of the following categories:
- I already have an amount in mind - please give me a quotation
- I need some advice - please contact me
In either case, please fill out our enquiries page and we will be more than happy to help.
Back to topHow much will it cost?
This depends on many factors, including your age, gender, health, term etc. We will provide a competitive quotation based on a thorough search of the marketplace and your personal requirements.
Back to topTypes of life assurance
Pension Term Assurance
Since April 2006, changes to pension regulations have put pension term assurance (PTA) right at the top of the list for people looking for competitive life cover. That's because it's now possible for almost anyone to obtain tax relief on their life cover premiums. A low rate tax payer gets 22% knocked off at source and a high rate tax payer gets the other 18% off their tax bill. Life insurance providers have quickly latched on to this and have been competing with each other to get their share of your business, so it's highly likely you could save money on your life cover by switching to PTA. Contact us to find out how much you could save.
Family Income Benefit
This is a Life Assurance contract which rather than paying a lump sum during the term, in the event of death pays a regular income to the beneficiaries for a certain pre-determined length of time.
The regular payment is usually made from the date of death until expiry of the policy term. The contract does not contain any investment element.
Mortgage Protection*
Mortgage Protection cover is, as it's name suggests, a policy used to pay off your mortgage in the event of you dying. If you are a single person with no dependants, it's unlikely you will need this kind of cover, though some unscrupulous brokers may try to convince you that you do. Mortgage Protection is simply a type of Term Assurance Policy where the initial amount of life cover reduces each year, closely matching the outstanding capital debt on your Mortgage. They tend to be cheaper than 'level term' policies as the benefit is being reduced as time goes by.
Level Term Assurance
This type of plan pays a lump sum in the event of you dying during the term of the policy. It can be used for all kinds of purpose, but typically to protect your family or dependants and provide them with a lump sum (which could be used to produce an income) in the event of your death. The contract contains no investment element. If you were to fall ill after the policy has expired, you might have difficulty replacing the cover.
Convertible Term Assurance
This contract is similar to a Level Term Assurance Policy with one distinct difference. The policy may be converted into an Endowment or Whole of Life Plan, regardless of state of health. This was once seen as a valuable benefit, but is now an outmoded way of dealing with your life cover needs as current thinking does not favour either endowments or Whole of life policies except in very specialist circumstances.
Higher premiums are usually paid for this type of Life Assurance compared with Level Term Assurance and they have now virtually died out.
Renewable Term Assurance
A Level/Convertible Term Assurance Policy will expire at the end of its term at which point, due to medical conditions, premiums payable for further cover may be more expensive.
To provide some protection against this eventuality a Renewable Term Assurance Policy allows the original policy to be replaced with a new plan at the end of its term, or extended, regardless of state of health. Again, not nearly as popular as they once were, but you might have one you took out years ago.
Endowments
A Low Cost Endowment is a combination of an Endowment Assurance Policy and a decreasing Term Assurance. These policies were typically used to fund a Mortgage, but lower rates of growth have resulted in the almost certain death of this kind of policy. Indeed, many thousands of people have sought compensation for their endowment falling short of its intended target figure. So, it's highly unlikely you would want to take out a new endowment policy in this climate.
If you have endowment policies already, its crucial you have them reviewed to see where you stand in relation to whether they will still pay off your mortgage. In some circumstances, it can be more cost effective to surrender them, pay the proceeds off the mortgage, convert the borrowing to a repayment method and take out low cost life cover such as Pension Term Assurance to replace the cover you will lose from surrendering the endowment. However, this is a complex subject and every case is different.
We can review your endowments for you and give you an unbiased opinion on what you should do. Typically, we will make a charge of around £350 to do a full assessment, as this is a complex subject. However, the potential saving you could make or money you could stop wasting, should more than justify the cost of us looking at the policies for you.
Whole of Life Policies
Whole of Life Assurance, as the name suggests, can provide life cover without imposing a limited term. As with Endowment Policies, they may be With Profits, Unit Linked or on a Low Cost basis.
There is a choice between the maximum and minimum levels of cover available at given levels of premium. Standard cover basically allows the same level of life cover to be kept up throughout life, as long as the fund achieves a specified minimum annual growth rate. If this rate is not achieved, you will either need to increase the premium to maintain cover, or to decrease the level of cover to a sustainable level.
Whatever level of initial cover is chosen, that amount is guaranteed to be maintained for a specified term (normally 10 years).
Frequently asked questions on life assurance
Can I receive a refund of my Life Assurance premiums if I haven't needed to make a claim?
Level Term Assurance does not contain a savings element but provides financial protection if you die within a specified period of time, or what is referred to as 'the term'. If you are alive at the end of the Term, or you cancel the policy, no payment is made and there is no surrender value - meaning that if you stop paying the premiums, you will no longer be covered and you will not receive a refund of premiums paid.
In some ways it's like motor insurance*, if you don't claim, you have paid the premium, but at least you are still alive and well.
How long does the Term of the Life Assurance Policy have to be?
For as long as you need it to be. Typically the term is set for the same number of years as your mortgage or until your family is likely to be no longer dependant on you, but cover can be arranged for periods as little as 1 month. The term you choose will depend on your own circumstances, and the reasons you have for wanting to take out protection.
As regulated financial advisors we can advise you on this.
Is it cheaper to have a joint Life Policy or two separate Life Policies?
It is often cheaper to have a joint Life Policy that pays out on the death of the first to die. Two single Life Policies are often more expensive but will cover you both individually, and each policy would pay out the benefit, if each of you were to die during the respective terms of each Policy. However since the revamp of Pension Term Assurance having two individual policies has become much more cost effective.
What is the average sum assured?
There is no average sum assured. The amount of benefit chosen will probably reflect your reason for taking out protection. Things you might consider could be the amount of mortgage* or any other loans, the normal cost of living expenses, loss of salary or the cost of childcare.
Think how your family would suffer financially if you or your partner were to die. Ask us for advice on the correct amount of cover for your circumstances.
What is Terminal Illness benefit?
Some policies have what is called a Terminal Illness benefit. This amounts to the acceleration of payment of the Death Benefit. Should you be diagnosed with an illness from which you are expected to die within 12 months, and before the end of your Policy, the benefit may be paid out early.
If you can't find the answer to your specific question, please contact us with your question or to arrange an appointment to discuss your personal circumstances.
Should I make a will?
Almost certainly. Especially since the laws of intestacy changed in February 2009. Your spouse would only be entitled to the first £250k of your estate if you have children, plus half the balance. Is that what you want to happen? If you are taking out life cover, then it follows you must have a beneficiary. In which case it is vital you make a new will or review your existing one. Call us for a recommendation of a good solicitor.
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