Life Assurance is needed for only one reason - to provide
money for people who depend on you. If there is no one
who will be financially distressed by your death, life
assurance is not needed.
It is normal for the need for assurance to decrease as
your family grows up and leaves home. Also, if you create
a number of areas of savings, this will obviate the need
for life assurance over a period of time.
Remember that both you and your spouse or partner will
probably need some life assurance but the amounts would
vary, since your income and expenditure will almost certainly
be different following one or the other's death.
It is almost always best to have individual life policies
for each person rather than joint life policies that pay
out only on the death of the first party. In these days
of fragile marriages, joint life policies are regularly
cancelled leaving both parties needing to re-insure themselves
at an older age and usually at a higher premium.
You should also review your life assurance needs every
few years as your income and other circumstances alter.
Life assurance can be simply insurance that pays out on
death only or there can be an investment element when
it is called an endowment. The following are all situations
that may require Life Assurance.
Mortgage
To ensure that a spouse and children are not burdened
with mortgage repayments, life policies ensure that the
outstanding mortgage is cleared on death.
Family
If you have small children then money will help provide
for them, perhaps by allowing the surviving partner to
stay at home or work part time for some years.
Business Debts
Banks and creditors get worried when key people die. Credit
lines get shortened or even pulled, often with fatal consequences
for businesses. Your business should insure you to provide
cash to settle all debts and recruit a new person.
Business Partners
If you die you hope that your colleagues will pay a fair
value for your share of the business, but they can only
do this if the funds are available. Insurance is used
to provide this.
The good news is that many people already have some life
assurance, and that in many cases this will suffice for
their needs.
If you are a member of a good company pension scheme read
your benefits booklet. You may well find that if you die
your spouse and children will get a lump sum and / or
a pension. We can calculate the benefits and make sure
that they will be sufficient.
If you are not in a good company pension scheme and are
self employed, or in business, and have dependants, then
it is essential that you have your position assessed.
We can help you do this.
What Types of Life Policies
are there?
The most basic form of life assurance is Level Term Assurance
where you pay a regular monthly amount (Level) for a set
period number of years (Term) and, if you die during that
period, the policy will pay out a set amount. The advantage
of this type of insurance is that it is basic and cheap.
The problem with LTA is that it only covers death and,
then, only during a defined period. If your health deteriorates
significantly during this period, then you will get no
benefit and any additional cover might prove very expensive.
There are a wide range of more Convertible and Reviewable
Term Assurance policies where you can elect to increase
the amount of your cover, increase the length of your
policy term or, in other ways, vary or review the terms
of the policy without taking another medical. This provides
you with the comfort of knowing you will always be able
to get cover. However, as you would expect to reduce your
level of cover as time goes on, having the ability to
increase cover is not that useful and all those additional
benefits add to the cost of the policy.
There are also Decreasing Term Assurance policies where
the amount of your cover reduces each year. These are
generally used as Mortgage Protection policies for repayment-type
mortgages but if you are confident that the amount you
will need to provide for your dependants is going to decrease
over the years then it makes sense to consider this less
expensive option.
To find out how much it
costs please go to our Online Services
Life Quotation system
