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Guide to Life Insurance

What are the benefits of Life Insurance?

Life Insurance provides financial peace of mind for you and your loved ones if the worst should happen. It provides a cash sum to help those you leave behind to cope financially, providing them with the funds they need to continue the lifestyle you would have provided for them.

Which type of cover is right for me?

The level of cover that will suit you best depends on your personal circumstances and what you want out of your life insurance policy, but the two main types are 'level' term life insurance and 'decreasing' term life insurance.

Why choose level term insurance?

You can choose a 'level term' policy if you want your family to receive a pre-determined lump sum pay out when you die in return for regular monthly payments.

Level term insurance is a straight forward policy which pays out a fixed lump sum upon your death during the term of the policy - once the policy term has ended it expires without value.With level term insurance, the premiums that you pay remain the same throughout the term of the cover, as does the lump sum paid out when you die.

Why choose decreasing term insurance?

For many people, the main financial worry is whether or not their family would be able to cope with the mortgage repayments if they die; if this sounds like you, then you might want to go for a 'decreasing term' policy, which is more commonly known as a 'mortgage protection policy'.

With a decreasing term life insurance policy, premiums are likely to be lower than for term assurance and the amount you receive is intended to pay off your outstanding mortgage. The sum assured decreases each year broadly in line with the outstanding capital of your capital and interest repayment mortgage; by the end of the term the sum assured has reduced to zero. A decreasing life insurance policy can protect your family and your home by paying off your mortgage in the event that you pass away. You choose the amount of cover that you need and the length of the plan depending on the mortgage debt that you have outstanding. These types of policy are not suitable if you have an interest only mortgage. There are also decreasing term assurance policies that will decrease proportionately over the term and these are suitable for those people who have an outstanding liability that will reduce by a fixed amount each year.

Who is eligible for Life Insurance?

Most large insurance companies will provide life insurance for you as long as you are a UK resident aged at least18; there is generally not an upper age limit, but most insurers will specifiy an expiry age - normally somewhere between 60 and 75. It is quite possible to take out cover when you are 55 but you won’t get a 25 year term. There are also certain groups that may be refused cover by some insurers or have their premiums increased to take account of any increased risk, for example, people in the armed forces and other high risk professions.

What if I have had health problems in the past?

When you apply for a life insurance policy, you will be asked questions about your health; these will generally be related to whether you have been diagnosed with, investigated or treated for things like heart disease, cancer, brain or spinal tumour, HIV and other serious illnesses. If you can answer no to all these questions, you should have no problems getting life insurance, but if you answer yes, you may be 'rated' which means you may have to pay a higher premium.

What are the other options?

For added financial security, you may decide that you wish to add 'critical illness' to your life insurance policy. Critical illness insurance can be arranged as a stand alone policy or as an add in to a life insurance policy.

Critical illness insurance pays out a lump sum in the event that you are diagnosed with a specified illness or condition which will be defined when you take out the policy, but generally covers things like cancer, heart disease and permanent total disability. Because critical illness can strike at any time, a critical illness policy can provide financial peace of mind in a time of personal crisis.

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