As Chartered Financial Planners and Independent Financial Advisers, Jacobs Financial provides specialist advice on life assurance and critical illness protection options.
There are several ways in which to protect yourself and your family in the event of an untimely death. Most people take out life insurance to provide for their families and alleviate any financial worries at a difficult time.
Term/Level Term Assurance pays a tax-free lump sum in the event of death during the term of the policy. Premiums are paid monthly, and remain constant throughout the term. There is no investment element within a term assurance contract, therefore there is no maturity value and life cover lapses at the end of the term. This is the simplest form of life assurance available.
Decreasing Term Assurance works exactly as above, but the benefit is set at outset and gradually decreases over the term of the policy to dovetail with the sum outstanding. Because the benefit reduces over time, the constant premiums are kept very low throughout the term of the contract. These policies can be used as a cover for a repayment mortgage, or other loan where the amount of capital outstanding decreases over time. As the amount of the loan is being constantly reduced by the borrower throughout the term, the sum assured under the policy also reduces.
Family Income Benefit works in the same as term assurance but, instead of paying a lump sum upon the death of the life assured, the insurance company will make a series of regular payments to the dependants.
Critical Illness cover is usually available as an add-on to all term assurance plans but can be bought on a stand-alone basis. Life assurance policies traditionally pay out on the death of the life assured, however, a policy with Critical Illness cover will pay out if the life assured suffers any one of a number of pre-defined critical illnesses such as cancer, heart attack, stroke, total & permanent disability and so on.
Whole of Life policies offer the policyholder a guaranteed level of life cover, not for a specified period as for term assurance, but for the lifetime of the holder. Although single-premium policies are available, most policyholders pay a fixed regular premium for one of three main types of whole of life contract. As this type of contract includes an investment element there is a potential risk associated with it.
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