UK Life Insurance Policy

What are the types of life insurance policies available?

Life insurance has been created to solve the problem of what should happen if the income of the life assured is lost to the people they depend on. The type of life insurance policy that you purchase depends on a variety of factors. To the general public, it may seem that choosing the right protection product is simply guesswork, but in fact it's quite a complex process.

Perhaps the two most important levels of cover are the term insurance policies and the whole of life policies, which specifically cover you in case of your death.

Term insurance, as the name implies, will provide life assurance for a fixed term. The amount that is assured is only payable should the person whose life is assured die during the fixed term. Should the term assurance policy be cancelled before the term is completed or matures at the end of the term without the life assured dying, no benefit will be payable. The customer will pay the premiums throughout the contract term. The best advantage of term insurance is the high life cover available for low premiums.

Whole of life policies have premiums payable in order to provide for the payment of a lump sum on death at any time. How much that lump sum will be depends on the type of policy. Should a non-profit policy be taken out the sum assured will be fixed at the same level throughout. If it is a with profits policy the sum assured will be increased at regular intervals by a (non-guaranteed) bonus each year of the policy and by a terminal bonus at the end. Should a unit-linked policy be taken out, the sum assured will be linked to the value of the investment.

Just as financially penurious as death, if not more, is the diagnosis of a critical illness. Should this happen, not only is it likely the sufferer will not be able to work, but they will need to be looked after, and care is expensive. Therefore, on payment of regular premiums, you will be covered on diagnosis of the illness with a lump sum paid out providing the illness has been specified and the treatment is allowed. Critical illness can be added to both term and whole of life policies in order to make the cover more realistic.

Finally, we look at Key Person or Key Man insurance, where vital business people are covered should they not be able to work. A variety of this is where a major shareholder or partner's equity is covered should they die and the remaining partner or shareholders want to keep hold of the equity.

 

 

 

 

 

 

 

 

 

 

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Life Insurance

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