Life Insurance
Life insurance should be simple - you pay a
lump sum or a regular payment which may be fixed or may be variable,
for a fixed or variable period of time, and if you die within
the period of the policy the insurer pays out a lump sum of money
which may be fixed or variable and if you live they will pay out a
fixed or variable sum, or nothing at all. Confused? Let's beak
it down and it should become clearer.
The most common policies are:
term insurance policies last for a fixed period of time and pay
out a guaranteed sum if you die before the end of that period. If
you live beyond the policy period (called the 'term') there is no
payout at all, however. These could be further broken down into
level term, in which the premium and the sum payable stay the same
throughout the whole period; reducing term, normally used to cover
mortgage repayments, in which the premium stays the same but the sum
payable reduces over time; or reviewable term, which are usually the
cheapest to start off with but which are subject to periodic review
which can result in increased premiums or decreased cover.
Whole of life policies differ in that they pay out whenever you
die regardless of when that happens and as a consequence it is more
expensive than term insurance. The policy could be paid for by a
single lump sum or regular payments; these payments could be fixed
for life or reviewed at regular periods.
Endowment insurance is a savings scheme linked to insurance and
part of the premiums go towards paying for the insurance and part
into investments. The tax advantages that this type of policy used
to enjoy have been taken away and recent end values have been
disappointing so this type of policy is not so popular now.
In addition to the above, policies can include critical illness
cover which pays out if you are diagnosed with one of an agreed list
of severely debilitating conditions; or terminal illness cover which
will pay out if you develop a condition which makes it likely that
you will die within the next year or so. In both cases the policies
will not usually pay out if they are nearing the end of the original
term.
A good case can be
made for buying car, home, pet and travel insurance online because
premiums can be lower - sometimes a lot lower, than you would expect
to pay from a local broker. Life insurance however is a far more
complex matter since we are all different and have different needs
so you may feel that it would be wiser to discuss your options with
a properly trained and approved professional. |
