Estate Planning, Inheritance Tax Advice, Taxation & Trust advice are not regulated by the Financial Conduct Authority.
The value of investments and the income they produce can fall as well as rise. You may get back less than you invested..
Protecting Your Family
Life Assurance
Life assurance policies pay out either a lump sum or a series of payments, when a person dies during the life or ‘term’ of a policy and usually to his/her dependants.
In most instances, these payments — known as the ‘sum assured’ — are tax-free. There are many reasons why life cover may be important for you. For example, the proceeds may be used to:
- Pay off a debt such as a mortgage
- Provide an income for your dependants
- Protect a business from the impact of a crucial partner dying-see Business Protection
- Fund a savings plan for the benefit of your children
Payments to the life assurance company are made monthly, or annually, and cover the policy holder for a pre-agreed term (because of this, most life assurance policies are referred to as ‘term assurance’ policies).
If the sum assured hasn’t been paid out by the end of the term, the cover will come to an end and the policy holder will get nothing back. Life assurance policies can be combined with other forms of insurance, such as Critical Illness Cover, so that a lump sum is paid out if you are diagnosed with a serious illness rather than on death.
It’s worth pointing out that many pension plans (personal and occupational) have a life assurance element built into them, which would pay out a certain sum assured should you die before reaching the stipulated retirement age.
In the case of occupational pension schemes, the cover is often expressed as a ‘multiple’ of salary. Importantly, if your life assurance is arranged through an occupational pension scheme offered by your current employer, you must seriously consider starting a new policy to replace the cover if you leave your job.
In fact it is often best to arrange standalone policies, owned by you and therefore in your control, to cover 1,2 & 4 above, Independent of any free cover provided by the employer. If you can treat the employer cover as the ‘icing on the cake’ but already have the foundations you will always be protected should your employment circumstances change.
This is especially important, as an interim measure, should your new employer only provide life assurance once you have worked for a certain period of time, i.e. during a probation period.
How much does life assurance cost?
The premiums for life assurance policies vary according to your personal circumstances, for example, age, medical history and your goals (see below).
Your choice of Life Assurance Company can also affect premium levels: some will naturally be more competitive than others. Speak to an experienced financial adviser to ensure you are getting the most competitive rate for you.
What should I think about when selecting a life assurance policy?
Your first consideration should be the level of insurance cover required. Ask yourself questions such as:
- How much money do I need to pay off all my debts?
- How much money do my dependents require to live the same lifestyle that they currently enjoy?
- Once you have decided on the level of cover, you then must decide on the type of insurance required.
- Do you want a policy that pays out a lump sum or one that provides a regular income?
- Do you want to pay a little more and use your policy as a savings plan?
- Do you even want a plan that pays out irrespective of whether you die during the lifetime of the policy?
Once this has been established, you are in a position to compare the premiums required by the various life assurance companies. However, you should always read the terms of the policy to check any restrictions or exclusions contained within it, such as death caused by undertaking a hazardous pursuit.
Types of Life Assurance Policies
There are various types of life assurance policies; a large number of life policies are ‘term assurance’ policies, of which there are many different kinds.
What happens if I stop paying the premiums?
This depends upon the type of policy you have. Unless you have an endowment policy or ‘whole of life’ assurance, which contain an investment element you are unlikely to receive a return from any premiums you have paid. Even with endowments or whole of life plans you may not get back all the money you paid into the policy.
In most cases, if you stop paying the premiums to your policy, then after a certain amount of time your life assurance cover will cease to be provided, i.e. your policy cover will lapse.
If, at a time in the future, you wished to reinstate the policy then fresh medical evidence would normally be required by the life assurance company before new cover could be offered.
For more information on life assurance policies,
please call us on 020 8441 2605 or 01442 232 272.
Alternatively, for our enquiry form,
Estate Planning, Inheritance Tax Advice, Taxation & Trust advice are not regulated by the Financial Conduct Authority.
The value of investments and the income they produce can fall as well as rise. You may get back less than you invested..