What is Life Cover?

Money paid, generally as a lump sum but sometimes as income, on the death of the person insured.

It is designed to provide financial protection to those that depend on you financially.

It can also be used to repay debt.

When should it be used?

If you have a mortgage or other debt that you do not want your dependants or Estate to have to pay.

If you want to provide a lump sum or income for those that are financially dependent upon you.

How it works – Term Assurance

Term Assurance is the simplest way of purchasing Life Cover, it allows you to select the term of the plan at outset which best meets your needs.

If you die within this term a payment will be made, if you die after the end of the term then nothing will be paid.

You can decide the level of cover that you require and the term that you want the plan to run for.

Many policies allow you to add Critical Illness cover to the plan.

Life Cover is available in a number of different forms:

Level Term Assurance The amount payable stays level over the term of the plan
Renewable Term Assurance As above, the amount stays level during the term, however the plan can be renewed at the end of the term, without having to provide further medical information
Decreasing Term Assurance The sum assured decreases over the term of the plan generally in line with the amount owing on your capital repayment mortgage
Family Income Benefit The benefit on death is payable as an income rather than a lump sum

Some companies offer guaranteed or fixed premiums, whilst other plans reserve the right to review premium levels on a periodic basis.  There is usually a small additional cost for the advantage of a guaranteed premium.

Many providers will provide a range of Trusts that can be used in conjunction with the policy, which means the lump sum or income is payable directly to the person or people of your choice, Your chosen beneficiaries will receive the benefit quickly without the need for probate or prior payment of Inheritance Tax (IHT), and in many cases using a Trust can help to avoid Inheritance Tax. As trusts are complex, it is important that the correct one is used and we recommend that appropriate advice is always taken when considering a Trust.

Advantages

  • It is a cost effective way of providing cover for your dependants should the worst happen to you
  • Both the level of cover and the term can be set at outset to suit your needs
  • The sum assured can be indexed to help maintain its buying power
  • There are a variety of different types of plan which will allow you to buy life cover meaning that you can choose the most suitable option for yourself
  • Critical Illness or permanent disability cover can be added in to make your protection planning more complete

Disadvantages

  • If you die after the end of the plan’s term, your dependants will not receive a payment
  • Term Assurance never accrues a value

Next steps

If you feel that you need to take out life cover or have your existing plans reviewed, then please contact us either by calling us on 0115 933 8433, alternatively you can email us at info@investmentsense.co.uk

We will discuss your requirements with you, and make a recommendation having considered your circumstances and any existing contracts that you may have.