There are three main types of life insurance:
Term Assurance: this is the most used form of insurance. It pays out a lump sum if you die during the term of the policy.
Family Income Assurance: this scheme provides an income for your dependents rather than paying them a lump sum, if you die during the term of the policy. You should note that the income is only paid for the time remaining on the policy, so you will need to make additional arrangements to go on providing an income after the policy expires.
Whole-of-Life Assurance: this type of policy is designed to pay out at the time you die whenever that date should be. Therefore as long as you maintain the policy there is guarantee that on your death the sum assured (level of Life Assurance cover) will be paid to your Estate. Some policies require premiums to be paid right up until the point of death others have a maximum term for which premiums are payable, where this is the case premiums are normally payable to age 80 or 85.
Endowment Assurance: this type of policy plays two distinct rolls. It provides Life Assurance protection should you die during the term of the policy, which are normally longer than 10 years, but if you survive throughout the term then the policy provides you with a lump sum, often known as the maturity value. As there is an investment element to these plans the premiums required for similar levels of Life assurance protection are sometimes higher than equivalent Term Assurance or Whole of Life policies.
State benefits You can no longer rely on the Government. State benefits for a single person are currently under £60 per week. Could you manage on that? The typical state benefit for two adults with two children is £96 per week; the maximum is £134 per week. Could you support your family on this?
Since October 1995 new mortgage borrowers will receive no state help for the first nine months of unemployment or disability. Existing mortgage borrowers receive nothing for the first two months, only 50% for the next four months and then full benefit for mortgages of up to £100,000 provided they qualify for Income Support. The Government themselves estimate that 70% of mortgage borrowers will not get Income Support due to savings, income, or a working spouse or partner.
In 1998 alone, the introduction of a new incapacity criteria resulted in 102,000 claimants being turned down for state benefit. An independent doctor (not your own) will carry out your assessment and you must be incapable of doing any work, not just your normal job, to qualify for state benefit.
Losing your income can become a reality due to an Accident, Sickness or Unemployment.
What would happen if you lost your income? Which bills would you be unable to pay – in particular do you have any credit agreements in place? The biggest is likely to be your mortgage.
It almost defies logic that people are prepared to risk being made homeless for the sake of a few pounds a week.
Clearly you ought to cover any large debts you may have, such as a mortgage. Then it’s worth considering how much it would cost your surviving partner to live without you, particularly if you have children. Experience suggests that you should insure your life for an amount equal to 3 times your current net annual income.
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| Home Insurance |
| Motor Insurance |
| Pet Insurance |
| Liability Insurance |
| Term Assurance |
| Whole of Life Assurance |
| Permanent Health Insurance |
| Critical Illness Cover |
| Mortgage Protection |
| Accident and Sickness Insurance |
| Redundancy Cover |
| Private Medical Insurance |
| Long Term Health Care |
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