Suite 411, Kingfisher Centre, Burnley Road, Rawtenstall, Lancashire, BB4 8EQ, United Kingdom
info@artfullodger-liverpool.co.uk
0845 123 55 34
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Artful Lodger Liverpool Ltd Suite 411, Kingfisher Centre, Burnley Road, Rawtenstall, Lancashire, BB4 8EQ, United Kingdom info@artfullodger-liverpool.co.uk 0845 123 55 34 |
Life AssuranceLife Assurance - ProtectionProtection policies will insure against something happening within a given period, known as the term, and will pay out either an income or a pre-determined capital amount, should the specified event occur during the term of the policy. For example you may take out a term assurance policy to provide a family with protection against the death of the principal breadwinner while the children are still young. If the breadwinner dies within the specified period, a lump sum is paid to the family. If the breadwinner survives then the policy becomes worthless and the family receives nothing. These term policies are relatively inexpensive but premiums will be determined by the insured's age, medical condition, occupation,and if the insured smokes. Policies may be written on the life of an individual or on the lives of husband and wife for example, in which case there may be an option to pay out on the first death or only after the second death. You should look at how much you are paying as the cost of these plans has reduced in recent years. There are two different ways of taking out life assurance: 1. TERM ASSURANCE. 2. WHOLE OF LIFE. Term Assurance Although there are different types of term assurance the common theme is that they run for a specific term. After the term has expired then the cover stops. There is no investment element in these plans whatsoever. There are six different options: 1. Mortgage Protection Mortgage protection is a type of term assurance policy also called decreasing term assurance. The initial amount of life cover reduces each year, closely matching the outstanding capital debt on your mortgage. You should be aware that if interest rates go over a certain % then your mortgage may not be paid off if you die. 2. Level Term Assurance This type of plan pays a lump sum in the event of death during the term of the policy. The contract contains no investment element. If you were to fall ill after the policy has expired, you would have difficulty replacing the cover. 3. Increasing Term Assurance Your level of life cover and premium will increase each year normally by RPI (Retail Prices Index) subject to a ceiling of typically 10% per annum. 4. Convertible Term Assurance This contract is similar to a level term assurance policy with one distinct difference. The policy may be converted into an endowment or whole-of-life plan, regardless of state of health. Clearly, this is a valuable facility. Higher premiums are usually paid for this type of life assurance compared with level term assurance. 5. Renewable Term Assurance A level/convertible term assurance policy will expire at the end of its term at which point, due to medical conditions, premiums payable for further cover may be more expensive. To provide some protection against this eventuality, a renewable term assurance policy allows the original policy to be replaced with a new plan at the end of its term, regardless of state of health. 6. Family Income Benefit This is a life assurance contract, which does not pay a lump sum during the term, but, in the event of death, pays a regular sum after death. The regular payment is usually made from the date of death until expiry of the policy term. Endowment Assurance A low cost endowment is a combination of an endowment assurance policy and a decreasing term assurance policy. These policies are typically used to fund a mortgage repayment. The endowment policy is structured so that if bonus rates continue within the levels quoted, the maturity proceeds should be sufficient to repay the whole of a loan (usually a mortgage), although this is not guaranteed. On death during the term the sum assured will be paid by the combined value of the endowment and the decreasing term assurance. A full endowment is really an investment contract so will not be covered here. Whole of Life. Whole of life assurance, as the name suggests, can provide life cover without imposing a limited term. As with endowment policies, they may be with-profits, unit linked or on a low cost basis. There is a choice between the maximum and minimum levels of cover available at given levels of premium. Standard cover basically allows the same level of life cover to be kept up throughout life, as long as the fund achieves a specified minimum annual growth rate. If this rate is not achieved, you will either need to increase the premium to maintain cover, or to decrease the level of cover to a sustainable level. Whatever level of initial cover is chosen, that amount is guaranteed to be maintained for a specified term (normally 10 years). This plan is subject to regular reviews and should fund performance be less than that anticipated then your premium might have to be increased. Other financial products include |
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