Mortgage Protection
The first thing to consider when discussing life insurance is what effect your death, illness or disability would have on you or your families standard of living. You should therefore think about your life insurance needs if:
- You have a spouse
- You have children who are dependent on your income
- You have an ageing parent or relative who depends on you for support
- You have another loved one you want to provide for
- You have business or estate planning needs
- Your pension and savings are not enough to protect your loved ones from the rising cost of living
How would your spouse or partner, child or other dependant survive if they lost your income?
There are five main types of life insurance to choose from. The choice of type of life insurance policy you take out will depend on your own personal needs.
Income Protection
This type of insurance replaces a portion of your income after
a certain period of being unable to work. Typically, benefit is paid monthly,
is tax free, and continues until you either return to work or reach 65.
Family Income Benefit
This type of life insurance pays an income in the event of the
life insured dying. You decide how much annual income you or your partner
would need and for how many years the insurance is required. This plan
is particularly useful if you are not used to handling large amounts of
money
Critical Illness Cover
This type of insurance pays a lump sum in the same way
as Level Term or Mortgage Protection insurances. However, Critical
Illness Cover pays out on the diagnosis of a variety of illnesses
including cancer, heart attack, stroke, etc. Each provider covers
different illnesses, and this is a major consideration when choosing
the right plan for your needs.
Level Term Life Insurance
This type of insurance is usually used in connection
with an Interest Only mortgage and provides a lump sum on death for
a term of years that you decide. An example of this would be to take
out a policy that paid out £150,000 if you died within the
next 25 years.
Mortgage Protection
This type of insurance is usually used in connection
with a Repayment mortgage. The sum assured reduces as the mortgage
debt decreases and the term of years are set to reflect the term
of the mortgage. If the life insured dies during the period the policy
pays out.
