Life Insurance: Planning for the future

Life insurance policies pay some kind of benefit if your health suffers or if you are unable to work as a result. Life insurance premiums are calculated using information based on your age, health, lifestyle and occupation.

There are a wide range of similar policies now available through a wider variety of channels - from leaflets in the supermarket to insurance brokers and financial advisers - which mean that you can concentrate on searching for a policy, based on price rather than complicated added extras.

There are three types of life insurance available for purchase:

Level term assurance - a policy which is taken out over a period of time - known as the term - the length of the cover is set by the customer and the lump sum amount that is paid out remains the same throughout the term of the policy.

Decreasing term assurance - a policy in which the payment amount falls over time. These policies can be taken out in connection with a repayment mortgage, which allows for the amount paid out upon death gradually decreasing in line with the debt.

Whole-of-life insurance - this policy has no specified term, and pays a guaranteed amount upon death, however the premiums for such a policy can change.

When searching for a life insurance quote it is important to decide on what you'd like the payout to go towards - whether it is to pay off debts or a mortgage in order to provide your immediate family with a good standard of living or to cover funeral expenses.

Be sure to take into account any other insurance policies or employee benefits before taking out a policy, but there are other steps you can consider in order to improve the value you can get from life cover.

There are joint life insurance policies available for couples. If both parties are suitable for the same level of cover they are usually offered a policy which pays an equal sum if either partner dies. The price of joint policies is often slightly cheaper than taking out two separate policies.

Another step to consider when choosing a life insurance policy is to ensure that it is written 'in trust' - which ensures that the proceeds would fall outside an individuals' estate when they die, which would not affect any inheritance tax calculations.

It is advisable to seek consultation from a financial adviser before taking out a policy, they can offer an explanation as to the processes involved in your policy and can aid in a decision which can be daunting but not necessarily complicated.

by David Collins


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