Life Insurance Guide
Life Insurance
The objective of life insurance is to provide a sum of money to your beneficiaries in the event of death within the specified term in the contract. It is often used for family protection.
There is no savings element in a policy for a set term, because it pays out only on death during the period that the plan is in force.
Available Options
Level Term - Sum assured will remain level throughout the term chosen
Decreasing Term Assurance - The sum assured will reduce over the term of the policy, usually on a fixed scale year by year, as the amount of the debt is reduced. It is often used to protect loans that are gradually repaid, for example a repayment mortgage.
Reviewable Rates - Your premiums will be reviewed at the end of the selected term and re-applied for without medical evidence. You will pay the rates then applicable if this option is chosen.
Guaranteed Rates - Your premiums are guaranteed to remain level throughout the term of the plan.
Waiver of Premium - The additional option of Waiver of Premium will pay your contributions after a deferred period, typically of 26 weeks, should you be unable to work owing to illness or injury.
Critical Illness
The objective of a critical illness plan is to provide a sum of money for you in the event of contracting a serious illness, as defined in the policy document, within the specified term of the contract.
Critical illness insurance provides a lump sum to a person diagnosed as having suffered any of the critical illnesses defined under the plan or, under some plans, if that person is permanently and totally disabled.
A serious illness normally means that sufferers have to make radical changes to their lifestyle. Most critical illnesses do not necessarily result in immediate death. A very high proportion of the people who suffer from such illnesses as heart attack, cancer or a stroke survive them for many years.
A capital sum would make all the difference to the quality of life under these circumstances. The money could be used for a variety of purposes such as repaying the mortgage or other debts, paying for a special holiday, extra medical care or perhaps necessary physical changes to the home; or it could simply be used to reduce the general financial pressures.
This is a protection contract only and does not acquire a cash value at any time whatsoever. If premiums cease then your cover will lapse.
In order for a claim to be met, there is a survival period of 14 days before benefits become available.
Options Available
Increasing Benefit - The benefits and premiums will increase annually on the policy anniversary.
Decreasing Benefit - Your cover will decrease each year in line with the amount approximately owing on your mortgage. There will be sufficient cover as long as the average interest rate on your repayment mortgage does not exceed the figure stated in your personal illustration.
Reviewable Rates - Your premiums will be reviewed at the end of the selected term and re-applied for without medical evidence. You will pay the rates then applicable if this option is chosen.
Guaranteed Rates - Your premiums are guaranteed to remain level throughout the term of the plan.
Waiver of Premium - The additional Waiver of Premium option will pay your contributions after a deferred period of typically 26 weeks should you be unable to work owing to illness or injury.
Total Permanent Disability (TPD) - The additional option of TPD will pay the sum assured should you become totally and permanently disabled.
Income Protection
The objective of income protection (permanent health insurance) is to provide an income in the event of long-term illness or incapacity.
The State benefit paid if you cannot work because of sickness or disability is unlikely be enough to meet your needs. Incapacity Benefit is taxable and it is based on a number of strict objective tests which are applied in deciding whether it can be claimed. Extra benefits, such as Income Support, are only paid if the claimant's income is very low indeed and many benefits are paid at the discretion of the Department for Work and Pensions.
There are overall limits as to what may be claimed under an income protection policy if you suffer long-term incapacity. Normally, your income will be assessed when a claim arises and up to 65% of your income may be paid, minus any State benefit entitlement. Therefore, the maximum income you may claim is the lesser of this formula and the amount you have actually insured for.
Your cover and premiums will cease at the end of your selected term and in the event of you having claimed on your policy, payments will also cease at this time.
Your plan will have no cash-in value at any time. If premiums cease then your cover will lapse.
Benefits under current UK tax legislation are paid without any liability for income tax.
Options Available
Level - Your premiums and benefit will remain level throughout the term of your plan.
Increasing - Your premiums and benefit level increase every year to offset the effects of inflation.
Reviewable Rates - Your premiums will be reviewed at the end of the selected term and re-applied for without medical evidence. You will pay the rates then applicable if this option is chosen.
Guaranteed Rates - Your premiums are guaranteed to remain level throughout the term of the plan.
Definition of Incapacity:
Own Occupation - unable to perform your own occupation.
Any Occupation - unable to follow any occupation.
Activities of Daily Living - unable to perform a number of activities required for day-to-day living.
Deferred Period - Period after which premiums will be paid. Options available - 4 weeks, 3 months, 6 months, 1 year.
