Ensuring you’re covered, if the worst should happen.
People nowadays insure their cars, homes and even their phones and dogs – but what about protecting their loved ones? Life insurance provides a safety net for your family and loved ones if you die, helping them cope financially during an immensely difficult time. There are many different types of Life insurance, but here are the most popular.
Level Term assurance
This is life insurance that provides a fixed rate of cover for a limited period of time, After that period comes to an end, so does your cover, If you die during the term, the amount you are insured for which is called the death benefit will be paid to the beneficiary, or into your estate, this cover is mainly used for family protection.
Decreasing term assurance
This is often bought to clear a specific debt such as a repayment mortgage as the loan will be decreasing itself over time, this will pay out on death of the borrower which will allow the loan to be paid off, this is really important if you leave a dependent that may not be able to maintain the mortgage payments on their own, by having a relevant pay out they can remain in the property and not have the stress of the monthly mortgage payment. So the term is usually selected to match the associated debt.
Business Insurance
Life insurance or critical illnesses the most important insurance a small business can purchase as it ensures the business can continue in the event of something happening to any key members of the business. When a person dies unexpectedly, or becomes ill it often has repercussions beyond just immediate family. This is especially true if the individual was a business owner or a valued member of a business. There are many forms of Business protection such as Keyman, Relevant life, buy sell agreements to name a few.
Being diagnosed with a critical illness is one of the most horrific things that can happen to us in our lifetime, your standard of living is seriously impaired as usually your earning capacity will reduce or disappear completely, with the advances in medical science it now means that people are surviving longer after diagnosis of a serious illness. Critical illness policies pay a lump sum on the diagnosis of a specified condition or disease. The illnesses covered vary from company to company the money you receive can help make life easier and help you concentrate on getting better. Most providers Pays a lump sum if you survive for 10 days after diagnosis of a condition that meets there policy definition, The money can be used in any way you like to help pay a lump sum off your mortgage, enable you to stop working, or buy private medical care.
Some cover for your children included
But be aware that not all conditions are covered and policy will also state how serious the condition must be.
Examples of critical illnesses that might be covered include:
You are on average 10 times more likely to get a critical illness than die over your mortgage term, which is why it is A lot more expensive than straight life cover; you can get a guaranteed premium which means the premium will not change through the desired term.
What is family income benefit (FIB)?
Family income benefit (FIB) is a type of life insurance. Policies run for a set period of time known as the term. If you die within this period, the policy pays out a regular tax-free income until the end of the term. With traditional life insurance a lump sum is paid out on death.
How family income benefit works?
Cover is only for as long as the policy runs. Once the term ends, the cover and any income payments cease.
With level-term life insurance a lump sum is usually paid out in the event of death. This lump sum is the same amount regardless of whether death is in the first or last year of the policy (although some policies run indefinitely).
With FIB, the total amount paid out by the policy depends on when you die. If you die in the early years of the policy, the total pay-out will be more than if you die nearer the end of the term of the policy.
This type of insurance is known as decreasing-term life insurance. Because the total pay-out decreases over time, this insurance is cheaper than an equivalent single lump-sum life insurance policy which runs for the same period.
Why you might want it?
FIB is a cheap and easy way to provide your family with an income rather than a lump sum if you die. If you have a young family, you might want cover to run until your children are grown up. This income could be used to meet everyday expenses or to pay for specific on-going expenses such as school or university fees.
Don’t forget that prices rise over time so you’ll need to factor this in when deciding on the amount of income needed. You may also have other life insurance which will pay out in the event of a death.
Cost
Premiums are based on the amount of cover and how long you want it for, your health, lifestyle (such as whether you smoke or not) and your age. You can opt for a level income or pay more for an income that rises by a set amount each year. Waiver of premium cover is also usually available. This ensures your premiums are met if you’re unable to pay them yourself because you fall ill and are unable to work.
Some policies now offer a critical illness option which means the policy would pay out if the policyholder developed a serious illness such as cancer. However, all extras like this will add to the cost. so, find out the cost of basic cover first.
Policies are often bought on a joint basis which means the income payments are made as soon as one partner dies. But it may be only slightly more expensive to own two individual policies. This is potentially better value as they would offer double the pay-out if both parties died during the policy term.