Just another WordPress weblog

Summary
A thorough and succinct guide to life cover. It explains all the important words the life industry uses and what type of cover various policies provide.

Life insurance helps your dependants to be financially secure when you die. When you aquire stipulate the cash value you want the plan to pay out when you pass away – this money is called ”the assured sum”. The monthly payment is based on this sum insured, and on your age and whether you are female or male.

Your monthly premiums will also be based on the type of cover you want. There are two basic types of life insurance cover: level term insurance and decreasing term insurance plus many variation s within these types.

Term assurance is often purchased at the same time as a mortgage and should cover the same period of time as the mortage. If you haven’t died at the end of the insured term, you don’t get a penny repaid. It is a simple insurance with no investmet element. It protects your wife and family by paying out a cash sum should you pass away within a specific time period.

There are two basic types of term insurance. Level term gives the same payout during the entire life of the policy which means that you beneficiaries would receive the same amount whether you died  right at the end of the term or on day one of the policy. It is usually bought with an interest-only mortgage, where the full capital has to be repaid on the final day of the mortgage’s term.

Decreasing term assurance is where the cash to be paid out to the lives assured reduces by a known amount each year, finishing at just one penny at the end of the term. Since the amount of cover declines during the term, premiums on this kind of insurance are cheaper than on level term plans. This cover is usually only taken out with repayment mortgages, where the outstanding capital reduces during the mortgage term.

There is also a type known as increasing term assurance. Some insurance companies call it index linked insurance. This means that the cash payout increases by a tiny amount each year in line with inflation. It is a good way of protecting the buying power of the capital cash you have insured for.

With convertible term assurance, the policyholder has the option of changing to another type of life policy – for instance a “whole of life”. If a person does take up this option, they do not have to have any extra medical investigations.

If you chose a type of insurance called family income benefit your family would receive a tax free monthly income if you were to die and this income would continue until the policy reached its termination date. This gives your dependents monthly payments from the date the policyholder passed away to the end of the policy’s term.

Life cover can be purchased on the internet or from the high street through  brokers, banks, insurance companies, from some friendly societies. Some sell directly to the public. Other outlets selling insurance include comparison websites and mortgage brokers.

Factors affecting monthly premiums include the sex, age, sum assured and whether or not you are a smoker. Some insurance companies insist on a medical before offering cover, but this is not so common as in the past.

Prices for life insurance can alter over time and if you already have an existing plan it might be worth shopping around to find out if you can get a more cost-effective deal. You can normally finish your existing insurance policy without penalty – but always ensureyou have another one in place before you  cancel your existing cover.

Summary
It is always advisable to identify precisely what you require in the way of cover as only you understand your personal circumstances.  We clarify what you need to understand and how to maintain it after you have it.

Sean Masters, head of investments at Cambridge based financial adviser AGT Independent Financial Services Ltd, warns that it is very irresponsible of people not to have Life Assurance and/or Critical Illness Insurance as he insists that life has 2 potential risks – either living too long and dying too early.  “Its very important to have some cover in place – especially if you have got young children,” he states. “In these unsettled times you need to  asemble your own little welfare state because no one else is going to do it for you.”

Greg Suttcliffe at LifeSearch says now is the best time to purchase such plans as there are some very competitive premiums about owing to the fierce competition for business within the market. “The cost of life cover has fallen – gone down by about 42 per cent in 5 years. It has never been cheaper,” he states. “The critical illness market paid out on eighty two per cent of claims in 2005 – rising from eighty one per cent  the during the last year.”

Be aware of what insurances you have before you take out more.  Do you have any investment policies or does your works pension fund give you any cover?

The easiest way to calculate how much insurance you require is to add up how much you would need to maintain the same level of living over a year and then multiply it by 26 years.  The minimum amount required should pay off any outstanding debt and provide a lump sum for all your dependants.

Obtaining the best deal

When making a decision on your insurance cover it is very necessary to read the manual that most a lot of insurance companies have of the conditions and illnesses that they deal with. It will record everything and should be clear-cut and simple to understand.  You will also want to look at the documentation of the main points of the insurance which will contain all benefits and exclusions.

When people take on the responsibility of a home loan they are usually counselled to take out critical illness insurance but should look around and not just take the first insurance policy offered.

If you commence paying these premiums when you are younger they are a great deal cheaper, distinctly different to leaving it until you are older, when the policy goes up quite apppreciably.

Life insurance quotes can also be lowered by giving up smoking.  Rebecca Sharp, head of protection insurance at Tesco Insurance states ” as well as giving a longer and healthier quality of life, giving up smoking can save people a vast amount of money.”

If you quit smoking you can knock as much as a 1 3rd off life, critical illness cover and income protection insurance premiums because the facts that we now have proves that smoking can bring about critical illness and aggravates any other existing medical conditions. You may have to change your policy if your circumstances alter.

Never believe that once you have purchased your policy that you can just carry on with your life and forget about it. Always be very aware of the cover you have and be sure that, should your situation change, or, are going to alter your policy must have capacity for these ajustments.  Clear examples are changing your job, or or maybe you would like to have more children; often think about anything that may increase your costs to live and would need to be covered if you are taken ill and cannot work. So get online quotes for life insurance today.

Summarys
The need to clarify the wording of policies, in particular those relating to critical illness cover. The innovative introduction of placing illnesses into categories, which will offer customers a greater choice of cover.

Very few people are covered against serious illness even though it may appear unexpectedly. Norwich Union, the income protection provider, has carried out  that shows only 5.2 per cent of the Britons work force possess critical illness insurance, even though they will collect a large sum if they have  a heart attack, stroke or suffer from cancer.

16 per cent of people consider the cover to be too dear, the analysis reveals, which give reasons for the low take up.

Potential customers are also confused by the phrasing of policies and the disparity between constant medical insurance and critical illness insurance.

An operational party formed by the AIB, is a present reviewing the phraseology of policies. The situation could turn out to be even more confusing if the  operational party decides to decrease the amount of conditions defined as a critical illness.

Legal and General have unveiled a new product named Elixia 123, which it states cuts the cost of critical illness cover by around 26 per cent and on occasions by upto 45 per cent.

This will be realised by permitting clients to select the illnesses for which they require cover. There are three groups of risk. Group 1. Strokes, invasive cancer and heart attacks. The policy will only make a settlement if the illness is life threatening or leads to major life style changes.

Category 2. Conditions that do not have so much impact on life expectancy but do significantly affect life style. Motor neurone disease, blindness and Alzheimer’s  are included in this group.

Category 3. Conditions

Critical illness cover is not that expensive so it is advisable to opt for a comprehensive policy, which will give you security.

Nye Jones, the distribution development manager at PruHealth, is worried about how the terms are defined. She emphasises that consumers must comprehend precisely what they are buying. For instance, when is a condition defined as major? The 1st and the 3rd categories need elaboration before purchasing cover as there is not much to choose between them in her view. Difficulties can happen later if the consumer has not fully comprehended the terms of the insurance policy when they sign.