A beginner’s guide to life insurance

Life Insurance is there to ensure your family is financially secure should something happen. But knowing that is just the start…

What exactly is Life Insurance?
For a surprisingly affordable monthly premium, life insurance delivers the peace of mind of knowing that should you die, your family will either have a lump cash sum, or a regular income, which can be used to pay off an outstanding mortgage or support them with paying monthly bills.

Term life insurance is the simplest and most affordable type of life insurance, designed to protect you for a set period of time. This is normally used to cover the mortgage, which is itself often limited to around 30-35 years. If you die during the policy’s term then you will receive a payout, if you live beyond this point then the policy will end.

What are the different types of Term Life Insurance?
There are various types of Term Insurance, designed to deliver the most suitable cover for you. Family Income Benefit: Instead of a lump sum, this policy will pay out a regular income to help cover
monthly payments and bills.

Level term: The amount of cover and total pay-out remains the same for the policy’s term.

Decreasing term: The total pay-out will reduce over the term of the policy. This can be suitable to take out alongside a decreasing loan such as a mortgage.

Increasing term: The amount of cover and premiums increase over the term. This can be suitable to combat the rise in inflation and the cost of living, as well as changes in circumstances.

What is an impaired life?
This is a term used to describe someone whose current circumstances would cause the underwritten premiums to be higher than a standard application. This can include not just medical and physical conditions, but the lifestyle or occupation of the applicant as well.

An application may be impaired for several reasons. This can include pre-existing medical conditions, hazardous occupations, or those that take part in high-risk hobbies. If you think you may have an impaired life, we can work through the provider options with you, as there are several that specialise in this area.

What else do I need to know?
It is often a good idea to buy Critical Illness Cover alongside Life Insurance, to ensure a comprehensive level of protection. Critical Illness Cover will provide a cash lump sum, should you be diagnosed with a critical illness such as cancer, heart attack or stroke. Life and Critical Illness cover can either pay on a first instance basis, or on the event of both diagnosis and death.

Life Insurance policies can also be written into Trust, which means they will not form part of your estate and therefore not be liable for Inheritance Tax (IHT). It is important to get tax advice before making any decisions regarding your tax options, but we can point you in the right direction.

If you would like to discuss your life insurance options then get in touch with an adviser today!

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