A deeper look into life insurance

Although there are different types of life cover policies, the type used or recommended will usually depend on what the reason is, it is being used for i.e

Level Term Insurance: Could be used where the same amount of cover is needed for a fixed period of time. So, if an interest only loan of £10,000 is borrowed for 10 years, then a Level Term Insurance, with a term of 10 years and a sum assured of £10,000 could be used; so that that if life assured were to die before the loan was repaid (within the term of 10 years), then the £10,000 sum assured would be paid and used to repay the debt.

Decreasing Term Insurance: Could be used where a loan of £10,000 was borrowed over 10 years and capital (the amount borrowed) and interest is repaid over the term. As the capital is being repaid during the term of the loan, at the end of the term of the loan no capital is outstanding, with a decreasing term insurance policy, the sum assured payable also reduces (in line with the amount outstanding) over the 10-year term to zero.

Renewable Term insurance: This type of policy could be used where an amount of insurance is needed for a fixed period of time, but at the end period the amount may need to be continued without the need for further medical evidence. Normally used by business owners to protect a Key Personnel within the company, a share owner or business loans.

Endowment: This policy provides a level sum assured should you die within the term of the policy and an investment element which also provides a cash amount at the end of the term. This type of life insurance was very popular to protect interest only mortgage borrowing.

Whole of Life: This type of policy will pay a sum assured whenever you die. It could be used to pay a debt due on death, for example an Inheritance tax liability.

There are other types of insurance policies available, which may be suitable for your needs. Please speak to one of our advisers who will be able to help you with your needs.

There are some life insurance policies that do provide a terminal illness benefit within the policy, but it is important to note that these are not automatically granted. If you have taken out a policy or are looking for a policy that offers a terminal benefit package that will pay out on diagnosis of a terminal illness you can ask your adviser to check the terms and conditions of your policy to see if you’re it is included.

Most policies will have some exclusions, things they don’t include, a few examples for which they may not pay out for are; if you die due to war, drug or alcohol abuse and you normally have to pay extra to be covered when you take part in risky sports.

Please note that this is only an overview of the types of policies that are available on the market and if you require a more in-depth explanation of any of the policies listed you should contact an independent financial adviser or read the Key Features Documents form the providers.

Remember, Life insurance will provide financial security for your family when you are unable to provide for them