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Life insurance, also known as term insurance or life assurance, will provide a sum of money in the event of death during the term of the policy. This cash lump sum is paid tax free and can be used by your dependents however they choose.
There are two main ways in which this cover is arranged:
A level term assurance policy is where the amount of cover (also known as the “sum assured”) stays the same throughout the length of the policy. Both the sum assured and the term are set at the start of the policy. Level term assurance 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.
A decreasing term assurance policy also pays out a cash lump sum in the event of death, however the amount paid out decreases over time. These policies are usually taken alongside a repayment mortgage so that the amount paid out is the same as the amount left on the mortgage. As the amount of cover decreases over time, the premiums for decreasing cover are typically cheaper than level term cover.
Critical illness insurance will provide a tax free cash sum in the event that you are diagnosed with one of a set list of critical illnesses, and when your diagnosis meets the provider’s definition. This cash sum can be used however you need to use it, be that to clear a mortgage, replace a lost income or pay for private treatment. Essentially it is there to make a difficult time financially easier, while allowing you to concentrate on the important things, such as spending time with your loved ones.
Like life cover, critical illness cover can be a fixed (or “level”) lump sum or can fall in line with your mortgage balance (“decreasing”), and you can either take it alongside life cover or as a standalone option. You don’t even need to fully cover the mortgage balance if your budget is tight. Some cover in the event of serious illness is better than none, after all. There are differences between providers as to their definitions as well as the additional benefits that are available, so it is not just a question of looking for the cheapest policy. We’ll make it our priority to get you the very best level of cover, whatever your budget.
An income protection policy pays out a monthly income to replace a proportion of your salary, in the event that you are unable to work as a result of an accident or sickness. It will pay out after a set amount of time has passed (decided by you at the start of the policy) and will continue to pay until you are either well enough to return to work, you reach retirement age or the end of the policy term. This means that you have the peace of mind of a regular on-going income to maintain your lifestyle should you fall ill, or have an accident and need to take time off work. Importantly, this income cannot be affected by state benefit cuts.
Family income benefit is designed to pay out an amount of cover in the event of death, but instead of providing a one-off cash lump sum like standard life insurance, 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 their dependants receive regular financial assistance, rather than having to decide what to do with one lump sum.
The term of the policy can be chosen to fit your family’s circumstances — for example to take your youngest child to age 18 or 21. The amount of cover you choose can be linked to inflation to ensure that, in the event of a claim, the benefit keeps its real value and spending power. Family income benefit is a relatively affordable way of ensuring that your family can maintain the lifestyle you want them to have — whether you are around or not.
Normally a condition to your mortgage will specify that the building and contents of your property must, at all times, be insured. Buildings insurance will cover your home from events such as fire, flood and subsidence. It generally covers the bricks and mortar of your home along with any fixtures and fittings within the property, while contents insurance protects the possessions within your home. While buildings insurance is not compulsory, if you have a mortgage, it is likely to be one of the conditions imposed by your lender.