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  Life Assurance

Life Assurance - Protection

Protection policies will insure against something happening within a given period, known as the term, and will pay out either an income or a pre-determined capital amount, should the specified event occur during the term of the policy.

For example you may take out a term assurance policy to provide a family with protection against the death of the principal breadwinner while the children are still young. If the breadwinner dies within the specified period, a lump sum is paid to the family. If the breadwinner survives then the policy becomes worthless and the family receives nothing.

These term policies are relatively inexpensive but premiums will be determined by the life insured's age and medical condition, whether he or she is in a hazardous occupation and whether he or she smokes.

Policies may be written on the life of an individual or on the lives of husband and wife for example, in which case there may be an option to pay out on the first death or only after the second death.

You should look at how much you are paying as the cost of these plans has reduced in recent years.

If you would like a quotation please email us and we will respond immediately.

Examples of Protection Policies

Term Assurance - Provides a lump sum on the death of the life or lives assured. If no death occurs in the term, then the policies simply lapse, with no value.

Family Income Protection - Provide an income in the event of the death of a parent. These policies are designed to allow for the employment of a nanny or helper to look after the children while the surviving parent is at work, or provide an income should it be the principal breadwinner who dies. The policy will provide cover against death during a fixed term and will cease at the end of the term without value.

Decreasing Term Assurance - Designed to provide for the repayment of any outstanding loan on a repayment mortgage. The payout will normally be made on the death of one of the mortgages. Premiums will normally fall as the sum insured gets smaller. There is no value to the policy once the mortgage has been repaid.

Convertible Term Assurance - Is designed to provide basic term assurance cover at outset with the option to convert to other types of policy in later years as circumstances change. There will be restrictions on the types of policy which it can be converted to and on the dates when conversion is allowed. Normally, conversion can take place without any additional medical examination.

From very early days in their history, life companies have also offered policies, which are in effect a means of saving. These policies were made more attractive by tax relief on premiums, and the fact that for many, the life company acted as a tax haven in that the rates of tax payable by the life fund were lower than those levied on the policyholder. While such tax incentives are a thing of the past, life assurance policies retain some attractions.

Examples of Life Assurance Investment Contracts

Endowment Policies - Are designed to pay out a cash sum on a specified date or on prior death. Level premiums are paid throughout and the final maturity value will depend on the performance of the underlying unit linked or with profit funds. Policyholders may decide to stop payments prior to the maturity value and cash in the policy for a reduced sum, the policy may be sold or the policy can remain in force and pay out a reduced sum on maturity.Provided the policy was originally for a term of ten years or more and premiums have been paid for more than 7.5 years, then the proceeds of the policy are tax free in the hands of the policyholder. Policies taken out before March 13th 1984 still qualify for tax relief on the premiums.The endowment has been used to provide a capital repayment for interest only mortgages, though this is less fashionable now than used to be the case because of the greater tax benefits of using PEPs or pensions as repayment vehicles. The advantage of the endowment lies in the ability of the life office to include such options as Low Start, critical illness and waiver of premium resulting in greater protection and flexibility.The endowment policy is used for a number of different purposes and may go under different names as life offices package the policy to meet certain needs. For example the endowment policy becomes a School Fees Plan, providing capital sums for the payment of school fees.

Whole Of Life Policies - Are basically a very simple policy which pays out a sum assured whenever the life assured dies. Because there is the certainty of payment, the policies are more expensive than term assurance where payment is only made if death occurs within a certain timescale. Whole of life policies may be regular premium or lump sum single premium. They may be non-profit, in which case only the guaranteed sum will be paid on death, with profit where the amount payable is the sum assured plus whatever profits have been allocated to the policy up to the date of death, or unit linked where the amount payable is the sum assured plus any additional value from the investment performance of the units.With all whole of life policies there are two elements, the cost of the life insurance cover, which is higher in the early years, and the investment element which may be low in the early years but then builds up. Single premium bonds are written in the form of a whole of life policy but usually provide little or no life cover. Most policies will have options such as critical illness, permanent disability and permanent health cover as extra cost options, making them very flexible. Whole of Life policies can be very useful in providing a fund to meet Inheritance Tax. The premiums will normally be covered by the annual exemptions, and by writing the policy in trust for the beneficiaries, the proceeds fall outside the taxable estate.

To sell or surrender?

In the past, if a policyholder needed to encash his or her endowment policy, the only option was to obtain a surrender value from the life office issuing the original. Surrender values, even in the years approaching the policy's maturity are much lower than the actual maturity value. It is now possible to sell the endowment policy and the proceeds can be far higher than on surrender. If you want to look at selling your policy then please contact us. You should bear in mind that surrendering or selling your endowment early is likely to mean a shortfall if it is linked to the repayment of your mortgage.

Mortgage Payments Protection Policies - Are designed to insure against being able to continue making mortgage payments due to sickness or unemployment. In the event of the insured becoming sick, having an accident or being made unemployed, the insurance cover meets the mortgage interest and repayments or life assurance premiums. This is becoming increasingly important as the State cuts back on its assistance for mortgage payments in such circumstances.
If you have cover that has been organised by a Bank or Building Society then call us as we can nearly always beat the price you are paying.

It is always worth looking at these plans on a regular basis as the cover you need changes as your income goes up.

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