Why have life Insurance Cover?

Paying of the Mortgage: Losing a family member is hard enough but having the added pressure of losing the roof over your head could make the whole situation far more traumatic. Choosing the right insurance cover can completely pay off your mortgage leaving your family in the security and safety of their own house

Replacement for Bread Earner Salary: This is to ensure that your family maintains the same living standard and pay all their expenses without having to fend for themselves

Paying for Childcare: Childcare is a very expensive these day and for young families its something worth keeping in mind when taking out life insurance

Education Expenses: Paying for schooling or university tuition fees can bring financial hardship to many families in case of the primary earner's death. A sensible life insurance policy can save your family from difficult times

The most popular life insurance policies are:

Level Term Insurance

• In this type of policy the amount to be paid out remains unchanged throughout the policy
• If the policy holder is still alive when the policy expires, no payment is made to the policy holder
• At the start of the policy you choose the term and the amount to be paid out in case of your death
• A regular premium is generally paid every month to the insurance company
• The premium amount primarily depends on your health, age, and occupation

• This is also know as mortgage protection cover where the amount to be paid out decreases over the term of the policy
• It is frequently used to protect the capital and interest payments of your mortgage
• As the mortgage reduces, the life cover also reduces in line with it but its calculated to be enough to pay off the outstanding mortgage capital
• The insurer will pay the calculated amount if you die during the term of the policy
• If you have taken out a joint policy (normally couples will do this), the insurance cover is paid out to the surviving policy holder

Critical Illness Cover

• This is an option that you can take with either of the above life insurance cover
• The insurer will pay you the life insurance cover if you are diagnosed with a critical illness during the term of the policy
• Many kinds of illnesses are covered such as a Stroke, Heat attack, Multiple Sclerosis, Cancer etc
• You need to contact the insurer to get the full list of illnesses covered, the insurer will be very specific about the illnesses that they will cover
• If you fail to disclose any previous or current medical conditions than it may result in the denial of the payment when the illness is actually diagnosed

• The cost of an insurance policy depends on your age, health, the term of the policy, the amount you are covered for, your occupation, your lifestyle, any diseases you have had in the past etc
• Always read the terms and conditions of your life insurance thoroughly as your circumstances may change over the policy term. This could result in the change of premiums and the eventual payout
• Some policies will not pay if your death is caused by taking part in a dangerous sports, you should be fully aware of all the rules concerning you policy
• Life insurance cover is not just for the bread earner. In a typical family where the mum usually looks after the kids and manages the house would have to look for a nanny and consider childcare costs in case of her death. In such circumstances a joint policy which pays out to the surviving partner is a good option
• The beneficiary of a life insurance is typically your partner, your children, could be other family members and can even be your business partner  
• The payout from life insurance policy is generally tax free. However if the payout takes the entire estate over the threshold of inheritance tax then a tax will be levied on the deceased estate.  To avoid this you can write the policy into a trust. A trust also pays the beneficiaries immediately upon death. However, managing a trust is complex and people who are looking to put life insurance into trust should seek advice from a financial advisor or a solicitor
• To make a claim on the policy the beneficiary of the life insurance will be asked to provide various proofs such the death certificate, proof of policy and other documents. It can take weeks before the actual payment is made. If the policy is in a trust then the payment can be made very quickly