The concept of Life Insurance is simple – if you pass away during the term of the policy then a sum of money is paid out. The exact reason for needing the cover may mean that a particular type of Life Insurance is better suited to your circumstances. We will advise the best type of cover for you – but here’s an overview:
Provides a lump-sum pay out, where the amount of cover stays the same throughout the policy. You can also include an option to have the amount of cover increase each year to keep pace with inflation (this is known as either ‘Indexation’ or ‘Increasing Cover’).
Family Income Benefit
The cover is paid out as a series of monthly or annual installments, rather than a lump sum. It can accurately replace the income lost as a result of death of a wage earner and the next of kin don’t have to worry about how to invest a large lump sum of cash. This type of policy is typically cheaper than Level Cover. Your Adviser will explain the pros and cons of each type of cover.
Whole of Life Cover
This policy does not have an end date. Provided you keep paying the premiums the cover will pay out a fixed amount of cover upon death, whenever that may be. The main benefits of this type of cover are to ensure funeral costs are covered, leave a financial ‘nest-egg’ for loved ones or to provision for an Inheritance Tax (IHT) bill. Learn more about Funeral and Inheritance Tax Planning.
This type isn’t particularly relevant to providing cover for your family. If you are looking to protect a mortgage which is on a repayment basis, then we would recommend this type of policy. The amount of cover reduces each year, typically in line with the outstanding balance of the mortgage. Learn more about Life Insurance for your Mortgage.