Life Insurance

09.22 / Diposting oleh metallic sucker and moslem militan /

The concept of life insurance (also known as ‘life assurance’ or ‘term assurance’) is often difficult to comprehend. Nobody wants to think about death, but the reality is that our loved ones will need support after we have passed on. That’s why moneysupermarket.com has produced an exclusive guide to help you make an educated choice on the type of cover you need.

Why do I need life insurance?

Coming to terms with the loss of a loved one is never an easy thing to do and adding financial burden to the grief can make coping increasingly difficult. It can help to support your family after you die, or even a business partner.
Among the reasons to take out life insurance could include:

  • Mortgage repayments – do you wish to arrange for your mortgage to be paid off?
  • Replacing the primary earner’s salary – ensuring the family does not fall on hard times after your death.
  • Replacing childcare – the death of the primary childcare provider could lead to the need for childcare expenses.
  • Education expenses – cover for school/university fees after the death of the primary earner.

Whether it’s about leaving your debts behind or ensuring your family can maintain the standard of living to which they were accustomed, it’s clear there are plenty of reasons to look for the best life insurance policy for your personal circumstances. Getting the best quote is an important part of finding the right policy.

Death has always been a difficult concept to accept but we all know the importance of making sure our loved ones are secure when we have gone. That’s why we’ve compiled an exclusive guide to life insurance. In part two we examine the different types of cover available.

Different types of life cover

Life insurance (also known as ‘life assurance’ or ‘term assurance’) is a policy that pays out a lump sum in the event of the policyholder’s death, with the purpose of protecting loved ones and dependents against financial hardship.

Life insurance is usually available on a single or joint life basis with benefits including paying out on the diagnosis of a terminal illness. If the policyholder is alive when the policy expires no payment is made and, should the policyholder stops paying premiums at any stage, the policy has no value.

There are several types of life insurance:

  • Level term insurance - designed to pay out a sum of money if the policyholder should die during the policy’s term. The sum assured is guaranteed and remains unchanged throughout the term.
  • Decreasing term life insurance i.e. mortgage protection cover – where the sum decreases during the policy. It is regularly used to protect capital and interest repayments on a mortgage.
  • Renewable term insurance – On the expiry date there is an option to continue without a health review.
  • Convertible term insurance – Level term insurance with the option to revert to whole life or endowment insurance.
  • Increasing term insurance – Due to inflation the value of money declines each year. Consequently, this form of insurance combats that with an escalating sum assured.
  • Index linked term insurance – Some insurers provide the option for the premium to be increased each year in relation to the Retail Price Index.
  • About Pension Term Assurance

    Following the announcement in the Pre Budget Report on December 6th Pension Term Assurance (PTA) is currently no longer available to new customers.

    What does this mean for you?

    I already have a PTA policy in force?
    Your policy will be unaffected and you will continue to benefit from the tax relief

    I applied before December 6th but my application is not yet in force?
    As long as the insurance provider had receipt of your application by midnight on December 13th you will be unaffected by the pre budget announcement and benefit from the tax relief. Your policy will need to be in force by April 5th 2007.

    Please note; if you need to make any changes to your policy, for example amend the sum assured or extend the term, you may not be eligible for the tax relief. In this instance you will need to contact the insurance provider.

    I applied after December 6th?
    You will not be eligible for the benefits and your insurance provider will contact you directly.

    If you have any further questions contact your insurance provider directly.

  • Moneysupermarket.com has compiled an exclusive guide to life insurance. In part three we examined pension term assurance and in part four we examine the additional benefits available.

    Endowment life insurance

    These are the equivalent of saving schemes with life insurance attached. They are often carried with mortgages and will pay out any returns at the end of the policy term or a lump sum when the policyholder dies.


    Family income benefit

    This means that the payment on your death will be given to your family in regular payments rather than as a lump sum. The term is chosen at the outset of the policy.


    Additional benefits

    When searching for life insurance cover you can also find additional benefits at an extra cost, including critical illness cover (this is a common additional benefit) and waiver of premiums.


    Critical illness cover is payable on the conclusive diagnosis of a critical illness. Some of the conditions covered in most benefits include (use these as a guide only):

    Alzheimer`s DiseaseAngioplasty
    Aorta Graft surgeryBenign Brain Tumour
    BlindnessCancer
    ComaCoronary Artery By-Pass
    DeafnessHeart Attack
    Heart Valve ReplacementHIV/AIDS (under certain circumstances)
    Kidney FailureLoss Of Limbs
    Loss of SpeechMajor Organ Transplant
    Motor Neurone DiseaseMultiple Sclerosis
    Paralysis/ParaplegiaParkinson`s Disease
    StrokeThird Degree Burns
    Permanent Total Disability

    Moneysupermarket.com has compiled an exclusive guide to life insurance. In part four we examined the cover and additional benefits available. In part five we examine ‘whole of life’ insurance and the different types of premiums available.

    ‘Whole of life’ insurance

    This guarantees the payout of a lump sum when the policyholder dies, at whatever time that may be as long as payments are maintained. The premiums and sum insured are guaranteed not to increase for the first ten years. However, they are more expensive as a claim is assured. These come in various forms:

    • Non-profit whole life policies – A level premium payable throughout life. It pays a fixed cash sum at the time of death.
    • With profit whole life policies – Same as non-profit policies but the amount paid on death is the sum assured plus whatever profits have been allocated.
    • Low cost whole life policies – These have a guaranteed level of cover that the amount payable on death is greater than the basic sum plus bonuses or the guaranteed death sum assured.

    Life insurance premiums

    Life insurance policyholders pay premiums into a fund from which all claims are paid out. There are two types of premium available – the guaranteed and reviewable policies:

    • Guaranteed Premiums – The life insurance company guarantees to never increase your policy premium.
    • Reviewable Premiums – You agree that the company can review your policy at set intervals.

    Initially the reviewable premiums will work out cheaper. However, over time these premiums are likely to be increased and therefore the overall cost will surpass that of the guaranteed premium. So generally, guaranteed premiums will work out as a better buy in the long run, but if you are on a tight budget the reviewable premium presents a better short-term option.

    Moneysupermarket.com has compiled an exclusive guide to life insurance. In part six we examine the applicants who may be considered a greater risk and who might be subject to exclusions or higher premiums.

    Taking a risk

    Life insurance is based on probability. Though unforeseen circumstances can cut life short, generally people will fulfill an average life expectancy and it is on this theory that life insurance companies can invest earnings and collect interest. However, for certain groups that probability is reduced and as such they are considered to be of a greater risk for life insurance companies. This could lead to higher premiums and, in some cases, even exclusions. Some of these greater risk groups include:

    • High-risk occupations – For example people who work at great heights, the oil and gas industry (especially offshore), the Armed Forces, pilots, fishermen.
    • Dangerous sports/hobbies – People who take part in such pastimes can be considered a greater life insurance risk. These could include aviation, climbing and mountaineering, motor sports, parachuting, bungee-jumping and even skiing, snowboarding or horse riding.
    • Poor medical history – People with an existing medical condition are considered a greater risk. Examples could include family history, weight issues, bowel conditions, cancer, high blood pressure, etc.
    • Smokers – Smokers are considered a greater risk than non-smokers due to proven links between smoking and some cancers (such as lung and throat cancer) and other serious and terminal diseases. Premiums for both life insurance and critical illness cover increase substantially as a result.
    • Over 60s – Any ten-year life insurance policy that takes you past the age of 70 would require advice from a regulated advisor with full FPC qualifications.

    Bear in mind definitions of high risk occupations, dangerous sports/hobbies and poor medical history can vary from insurer to insurer.

    Consequently, it is important to consider as many life insurance quotes as possible to find the best deal for you. It is also vital to disclose any information which may affect your risk rating because any omitted information can threaten any claim you make in the future.

    Saving money

    Buying life insurance online can save cash as it cuts out the ‘middle man’. At moneysupermarket.com we will compare more than 100 insurance products to find the policy that best suits your needs. Here are some important elements to look out for:

    • ‘Written in Trust’ – If your policy is written in trust then in the event of a claim this means that the money goes directly to the person you nominate. It also avoids your estate paying inheritance tax which could mean a 40% tax saving.
    • Joint life insurance – This is normally written on a first death basis, meaning the policy pays out on the death of the first policyholder. It will save money but bear in mind that it will leave the second policyholder to potentially try and get a new life insurance policy at an affordable premium in old age. Overall it will work out to be more expensive in those circumstances.
    • Critical illness – A life insurance policy with critical illness cover will work out much cheaper than two separate policies. Also remember to differentiate between critical illness and terminal illness cover. Most policies will automatically include terminal illness cover but the critical illness policy will pay out the lump sum for a range of illnesses with no life expectancy criteria.


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