Life Assurance
This is cover that pays out on death. Some plans pay upon earlier confirmation of a terminal illness where the prognosis is death within 12 months. It can pay out as a lump sum, or as income for the remainder of the policy term.
Don’t leave your loved ones in the lurch…
Cover can last for a set term called Term Assurance, or can last throughout life, called Whole of Life.
The amount of cover can remain the same or increase / decrease annually. Level term assurance stays the same throughout. Decreasing cover is sometimes used to cover a reducing debt, such as a repayment mortgage and usually assumes a given interest rate. Provided your mortgage rates don’t exceed that rate, then the cover should reduce at around the same rate as the mortgage. The amount you pay is called the premium. It can either be guaranteed not to change, or it can be reviewable.
Reviewable cover normally changes based on the claims experience of the life assurance company. The plan will cease at the end of the term. If premiums are not maintained, then cover will lapse.
Frequently asked questions
- Am I guaranteed to get cover?
No. Life cover depends on your health at the time of application. You will need to provide medical history information. Some providers will increase their premium (known as loading), exclude certain conditions, or even decline covering you at all.
- When a claim is awarded, is it taxable?
No. The lump sum paid out completely free of income tax. However, if the lump sum is paid into your estate, it could give rise to an inheritance tax charge. Putting your policy into trust should help combat this problem.
- Why do I need life cover?
Life cover is a useful way of making sure the loved ones you leave behind are able to cope financially. Whether that means paying off your mortgage, or other debts, or providing lump sums to ensure your children are financially sound and able to go to university or get themselves onto the property ladder.
