Life insurance provides a lump sum, paid tax free, to your dependents in the event of your death. Life insurance can also be known as term insurance and there are two main ways in which the cover can be arranged
Level Term Assurance
This type of policy is where the amount of cover, which is also known as the ‘sum assured’, remains at the same level thorough the length of the policy. This type
of policy is often taken out to help pay off a mortgage and is most suited to interest only mortgages, where the amount owed does not decrease over time.
Decreasing Term Assurance
again this policy pays out a cash lump sum in the event of death, but the amount of money paid out decreases over time.
These policies are a good fit when taken out alongside a repayment mortgage so that the amount paid out is the same, or close to the amount left on the mortgage. As the amount of cover decreases over the length of the policy, the premiums are typically cheaper than they
are for level term assurance.
Critical illness insurance provides you with a tax-free cash sum in the event you are diagnosed with one of a list of common defined critical illnesses. The cash sum you receive can be used however you like but is designed to take the financial burden off you during a difficult period
in your life. Critical illness, like life insurance, can be a fixed lump sum or can decrease in line with your mortgage.
Family income benefit
Family Income Benefit pays out in the event of death, but instead of a one-off lump sum of
cash, it pays a regular, tax-free income until the end of the policy term. This can be a suitable option for people who would rather that their dependents receive a regular income, rather
than a one-off lump sum.
In the event of an accident or sickness income protection insurance pays out a monthly income to cover a proportion of your salary. You decide at the outset how many months before the policy will pay out (the deferment period) and how long it will continue to pay (the benefit period). This can be until you are either well enough to return to work, you reach retirement
age or the policy term ends. Income protection insurance provides you with the peace of
mind of a regular on-going income that can help you maintain your lifestyle should you fall
ill or have an accident and are unable to work.