Life Assurance & Mortgage Protection
The aim of life assurance cover is to provide money for people who financially depend on you. You need to consider the impact and consequences your death would have on the people most close to you. This is particularly true when you're buying a house and it's essential to consider making provisions for what would happen if you or your partner should die.
What is life assurance?
Life assurance is exactly what it sounds like: an insurance policy that pays out on the death of the named party. You pay a monthly premium to the insurance company, and if death occurs within the term of the policy, they pay out either a single lump sum or a regular income (usually paid annually).
Types of life cover
Term Assurance.
You only get a pay-out within the 'term' of your policy. The payout you get is fixed from the start of the term until the end.
Level Term Assurance.
You only get a payout within the 'term' of your policy ie. 21 years. Level term assurance would guarantee a known lump sum payout upon death within a fixed time e.g. £220,000 if you die within the next 21 years.
Decreasing Term Assurance
Decreasing term assurance would usually be more suitable to protect a repayment mortgage.
Increasing Term Assurance
An increase in policy would ensure that the sum assured keeps in line with inflation.
Critical Illness Cover
Many illnesses can have a long recovery time. This type of cover is designed to pay out a (tax-free) lump sum in the event of you suffering from certain types of serious illness or if you have to undergo certain types of surgery.
Family Income Assurance
These policies are specifically designed to meet the needs of parents with (or planning) children. They provide an income payable from the date of death until a fixed time in the future (e.g. the youngest - newborn-child's 30th birthday).
Whole of Life Assurance
These are policies that provide life assurance for the whole of your life (as opposed to Term policies that for example could last for 5, 10, or perhaps 25 years then finish). Whole of Life insurance guarantees to pay out in the event of death, whenever it occurs.