Term assurance
Term assurance is one of the simplest and cheapest types of life insurance that you can buy – but as with all financial products, it's important to understand what policy or product is right for you and your particular circumstances.
Becoming a parent?
If you do not currently have life insurance cover, you should consider what would happen to your family if you were to die. Many people – approximately 8 million UK workers, get life insurance cover through their employer so it is important to check what your employer provides. An important point to remember is that cover is lost when you leave that employer so you should check what cover, if any, a new employer provides.
A Term Assurance policy pays out a lump sum upon death to provide for your partner and dependants. Typically, people with dependants would ideally need at least ten times their annual earnings.
A Term Assurance policy can be set up to cover a specific financial obligation such as a loan repayment.
Term assurance policies can include critical illness benefit. When this is included, the sum assured is payable when you are diagnosed as having one of the critical illnesses which are defined in the policy document and company literature, or when you die. Normally, the life assurance cover stops once a critical illness claim is paid.
You can also buy a Family Income Benefit policy, a type of term assurance which pays a monthly income from when you die over a term you stipulate e.g. 25 years. For example, if you died two years into the policy, it would pay out an income for the remaining 23 years.
Whichever policy you choose, it is vital that you ensure that the policy proceeds are paid to the right person. This might sound obvious, but it’s not automatic – you need to make sure the policy is written in trust with a named beneficiary otherwise the proceeds will form part of your estate. Writing in trust ensures that your life insurance pay out will bypass probate and go direct to the surviving partner and dependants.
Getting married?
If you do not currently have life insurance cover, you should consider what would happen to your spouse or partner if you were to die. Many people – approximately 8 million UK workers, get life insurance cover through their employer so it is important to check what your employer provides. An important point to remember is that cover is lost when you leave that employer so you should check what cover, if any, a new employer provides.
A Term Assurance policy pays out a lump sum upon death to provide for your partner. Typically, you would ideally need to insure at least ten times your annual earnings.
A Term Assurance policy can be set up to cover a specific financial obligation such as a loan repayment.
Term assurance policies can include critical illness benefit. When this is included, the sum assured is payable when you are diagnosed as having one of the critical illnesses which are defined in the policy document and company literature, or when you die. Normally, the life assurance cover stops once a critical illness claim is paid.
You can also buy a Family Income Benefit policy, a type of term assurance which pays a monthly income from when you die over a term you stipulate e.g. 25 years. For example, if you died two years into the policy, it would pay out an income for the remaining 23 years.
Whichever policy you choose, it is vital that you ensure that the policy proceeds are paid to the right person. This might sound obvious, but it’s not automatic – you need to make sure the policy is written in trust with a named beneficiary otherwise the proceeds will form part of your estate. Writing in trust ensures that your life insurance pay out will bypass probate and go direct your surviving partner.
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