Term Assurance & Whole of Life Cover What is life insurance?
Life assurance is the simplest, popular and best way to ensure your family is taken care of in the event of your death. It is designed to pay out a cash lump sum of money on death during the term of the policy which can be used to pay off your mortgage or provide for your family’s future to pay for things like summer holidays, university fees or weddings.
There any many factors to consider when purchasing life insurance and it can seem quite a daunting task. Our insurance broker at Prime Financial Solutions & Mortgages will deal with you directly from the first enquiry through to your application being completed, ensuring you are in control of the process from start to finish.
Our service is totally secure, allowing you to research, compare and buy the right life insurance cover for you.
Types of life insurance
There are different types of life insurance available:
- A level term policy will pay the same lump sum amount upon death no matter when this occurs during your policy. Therefore if you die on the first day of the policy, you get exactly the same sum as you would if you died near the end of the policy.
- A decreasing term policy on the other hand will pay out more at the beginning of the policy than it would at the end. As the sum assured reduces through the term and is more commonly used to cover a repayment mortgage.
- Whole of life insurance is different from term assurance as it will pay the sum assured on death regardless of what age that occurs. Whole of Life Cover will generally cost more than term assurance as you will be covered until you die.
Level term and decreasing policies are taken over a specific time period and are generally the cheapest and simplest form of life assurance.
The way a term policy pays out can also come in one of two ways. Those that pay out a lump sum on death and those that pay an income to the end of the term, known as Family Income Benefit. As usual there are pros and cons to both, a lump sum policy can be more flexible because it allows your family to have a lump sum upon your death for them to invest or use as they wish. A family income policy on the other hand is often cheaper because the liability is always decreasing for the insurer. For example, if you die in the 18th year of a 20 year policy, the insurers would only have to pay income for two years. It’s also easier to work out the level of cover with this type of policy because you simply work out the income you would need to replace.
Who does life insurance cover?
Life insurance policies can be taken as either single or joint policies. Joint policies usually pay when the first person dies leaving the second person without cover. This is usually the way you would have cover on a joint mortgage. An alternative to this is to take out two single policies meaning you are both covered separately with the insurer paying out for both deaths.