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Life Assurance is needed for only one
reason - to provide money for people who depend on you. If there
is no one who will be financially distressed by your death,
life assurance is not needed.
It is normal for the need for assurance to decrease as your
family grows up and leaves home. Also, if you create a number
of areas of savings, this will obviate the need for life assurance
over a period of time.
Remember that both you and your spouse or partner will probably
need some life assurance but the amounts would vary, since
your income and expenditure will almost certainly be different
following one or the other's death.
It is almost always best to have individual life policies
for each person rather than joint life policies that pay out
only on the death of the first party. In these days of fragile
marriages, joint life policies are regularly cancelled leaving
both parties needing to re-insure themselves at an older age
and usually at a higher premium.
You should also review your life assurance needs every few
years as your income and other circumstances alter.
Life assurance can be simply insurance that pays out on death
only or there can be an investment element when it is called
an endowment. The following are all situations that may require
Life Assurance.
Mortgage
To ensure that a spouse and children are not burdened with
mortgage repayments, life policies ensure that the outstanding
mortgage is cleared on death.
Family
If you have small children then money will help provide for
them, perhaps by allowing the surviving partner to stay at
home or work part time for some years.
Business Debts
Banks and creditors get worried when key people die. Credit
lines get shortened or even pulled, often with fatal consequences
for businesses. Your business should insure you to provide
cash to settle all debts and recruit a new person.
Business Partners
If you die you hope that your colleagues will pay a fair value
for your share of the business, but they can only do this
if the funds are available. Insurance is used to provide this.
The good news is that many people already have some life
assurance, and that in many cases this will suffice for their
needs.
If you are a member of a good company pension scheme read
your benefits booklet. You may well find that if you die your
spouse and children will get a lump sum and / or a pension.
We can calculate the benefits and make sure that they will
be sufficient.
If you are not in a good company pension scheme and are self
employed, or in business, and have dependants, then it is
essential that you have your position assessed. We can help
you do this.
What Types of Life Policies are there?
The most basic form of life assurance is Level Term Assurance
where you pay a regular monthly amount (Level) for a set period
number of years (Term) and, if you die during that period,
the policy will pay out a set amount. The advantage of this
type of insurance is that it is basic and cheap. The problem
with LTA is that it only covers death and, then, only during
a defined period. If your health deteriorates significantly
during this period, then you will get no benefit and any additional
cover might prove very expensive.
There are a wide range of more Convertible and Reviewable
Term Assurance policies where you can elect to increase the
amount of your cover, increase the length of your policy term
or, in other ways, vary or review the terms of the policy
without taking another medical. This provides you with the
comfort of knowing you will always be able to get cover. However,
as you would expect to reduce your level of cover as time
goes on, having the ability to increase cover is not that
useful and all those additional benefits add to the cost of
the policy.
There are also Decreasing Term Assurance policies where the
amount of your cover reduces each year. These are generally
used as Mortgage Protection policies for repayment-type mortgages
but if you are confident that the amount you will need to
provide for your dependants is going to decrease over the
years then it makes sense to consider this less expensive
option.
How much do I Need?
To work out how much life assurance you need there are just a few simple questions
to answer, we have put in a link to our simple client review
below which you can download and complete at your leisure.
How much does it cost?
Life assurance is generally not expensive. After you have
completed the simple fact-find, we can then work out roughly
what additional life cover you will need and the approximate
cost of providing that cover using various types of life
assurance.
To download our client review software click
here
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