Guide to Life Assurance

It is important to remember that this is only intended as a guide and may not answer all the questions you might have.  If, after reading this guide, you think you might need life assurance or critical illness cover, then you may want to speak to one of our fully qualified advisers.

Our advisers have trained for many years to achieve the necessary qualifications to help you and this guide is in no way an attempt to replace their experience and knowledge.  If you are in any doubt, whether life assurance is the right thing for your circumstances then just talk to us and one of our qualified advisers we will be happy to help.

Life Assurance is designed to pay out in the event of your death to help provide for your loved ones. So paying for it is an unselfish act. Life Assurance is also known as life protection.

It is however, usually one of the last things you might want to think about when for example, you have a new addition to the family, move home, or change jobs. These are all times when you should be reviewing the life assurance that you may already have in place to take account of your changing circumstances. Or indeed, taking out life assurance for the first time. That said, arranging to have the correct life assurance in place can be confusing and it is important that you find the right type of protection for your needs. This guide is designed to help you through that decision making process.

Some insurances, such as car insurance, are mandatory but life assurance isn’t. That said, it could be one of the best things you ever do. We’ve already mentioned it’s an unselfish act normally done by people that want to provide for their loved ones in the event of their own death.  Think about this… how would your family cope in the unfortunate event of your untimely death? If you have children still within your care, it could be very important, and by paying a little each month for life assurance, you could provide them with the financial security that they might need in the event of your death.

Read more in our article Why buy Life Insurance?

There are many different types and because of this, we recommend that if you are in any doubt about what you need, you should seek assistance from a protection specialist.

Basically there are two types of life assurance. The first one is known as “term assurance”, and the second is known as “whole of life assurance.”

Term assurance of any kind, is a policy that lasts for a set term. After the term the policy will cease.  To receive a payout from term assurance, the event that you are insuring against must have happened within that term.  It’s important to point out that if the event doesn’t happen then the policy won’t pay out and there is no refund of your premiums. Also, if you stop paying the premiums, the valuable life protection will cease and you will not get your premiums back.

Whole of life assurance does exactly what it says. It covers you for the “whole of your life.” There is no term and as long as you are up to date with your premiums, you have answered the application questions honestly at the start, then the policy will pay out at whatever point you die. It’s more expensive than level term assurance, but you have the reassurance that it will pay out. 

There are different types available such as a single life policy where you want to leave a legacy, for example to loved one or children or to cover funeral costs. Joint life policies may be used for example, to offset any potential Inheritance Tax liability (IHT). 

IMPORTANT NOTE: If you do not use Trusts for life assurance, the proceeds may be liable to Inheritance Tax at the current rate.

This depends on your personal circumstances and can be calculated in many different ways.  For example, you would obviously want to ensure that outstanding debts would be paid off, including your mortgages and any loans that you may have. There are however many other things to consider such as child care, school fees or education. Many people consider only having enough cover to repay their mortgage, however it’s one thing having the mortgage repaid, but if you don’t have the money to pay things such as utility bills, council tax and day-to-day living expenses, then the worry can be immense.

Life assurance is a fantastic way of providing for your family and your loved ones in the event of your death. However affordability is a major factor. The bigger the payout that you want to have, then the higher the premiums are likely to be and if affording the premiums each month leaves you struggling financially, you may have to reduce the level of cover.

This is a very difficult question and if you are in any doubt, you should seek guidance from a protection specialist. It’s not easy to choose the right life assurance policy as there are many things to consider such as what is the right level of cover? How long do I need the policy to run for? Should I add critical illness to the plan? Should I do a joint life policy with my partner or would a single life policy be more appropriate? The list of questions is long and different for everyone.