Level Term

This type of cover protects you for a given term for a fixed benefit. The amount of life cover chosen at the outset will be paid whether a claim on death is made in the first year of the term or the last year. Quite often a payment would be made on the diagnosis of a terminal illness before the last 18 months of the plan, where you had 12 months or less to live. This type of protection may be suitable for family protection and Interest Only Mortgage debt, where the level of debt on the mortgage does not decrease as the years progress, however, this would depend on individual circumstances and you should seek further advice.

• Provides a lump sum on death or terminal illness to help provide a financial buffer for your family or to pay off debts.
• The level of cover remains the same throughout the term of the policy.
• The policy pays out if you die during the term of the policy - or if, before the last 18 months of the term, you are diagnosed with a terminal illness. (A terminal illness means you are not expected to live for more than 12 months).
• Life insurance policies will only pay out once within the agreed time, so if the policy pays out because of a terminal illness claim, the policy and cover will end.
• Paying out on diagnosis of terminal illness may be proportionate to the level of cover under a death claim.

Decreasing Term

The least expensive of the Term Assurances, Decreasing Term Assurance does what it says on the label. The level of benefit decreases as the term of the policy runs; the premiums do not however reduce. The premiums are fixed throughout the policy term, and the premium level is lower than that of Level Term Assurance as a result of the decreasing benefit. This type of life assurance is commonly used to protect Capital & Repayment mortgage debt. Typically the policy reduces the protection assuming a Mortgage Interest Rate of 10%. Many are paying mortgage interest at around 5% and, providing interest rates do not go over 10%, the benefit should reduce slower than the mortgage debt, ensuring repayment of the mortgage debt in full. However, there is no guarantee that the level of cover will match the outstanding debt upon a claim.

• Provides a lump sum on death or terminal illness which can be used to cover outstanding repayments on a mortgage or loan.
• The level of cover reduces each year - in line with the sum you owe.
• If you die within the term of the policy, it will pay out a lump sum, to help clear whatever is outstanding on your debt at that point.
• This plan has no cash-in value at any time.

Family Income Benefit

Family Income Benefit protects a level of income for a fixed term. In the event of death, the amount of income chosen at the outset will be paid for the remainder of the term of the plan. Often the term is set to protect you until your youngest child is 18 or 21.

Family Income Benefit is one of the least expensive forms of life insurance and differs from most other types in that it is designed to pay the benefit, in the event of death, as an income rather than a lump sum.

Depending on your circumstances, indexation might be an option for this type of plan to protect the purchasing power, although the benefit can be level. If indexation is elected at the outset, the premiums and benefit would rise annually, normally by Retail Price Index.

Regular Tax Free Income Payments

In the event of a claim, income can be paid monthly, quarterly or annually and under current rules the income is tax-free. This makes it ideal for Family Protection where a family are looking to insure the main breadwinner over a specific term, for example to his or her retirement age.

Extra Cover Options

Family Income Benefit can also include Critical Illness Insurance which is designed to pay the selected income if the policyholder is diagnosed with a critical illness within the chosen term. Critical illness conditions vary from insurer to insurer but in general include such conditions as some forms of cancer, some forms of heart attack, and stroke etc. In addition to these "core conditions" applicants can also select comprehensive cover which usually includes 25 to 30 additional conditions.

Family Income Benefit therefore should be considered when looking to effect insurance for Family Protection. Family Income Benefit is a low cost, tax efficient solution to Family Protection.

Critical Illness Insurance

It's when you need to make a claim that you realise just how wise investing in a critical illness policy can be.

Considering just how many lives are affected by critical illnesses such as heart disease, cancer and stroke, it is surprising that more people do not take out critical illness insurance. Cancer alone affects 1 in 3 people.

The principle of critical illness cover is straightforward; in the event of one or more of the specified illnesses being diagnosed, the insurance company will pay out a lump sum after a specified survival period. Often, critical illness cover is combined with other types of insurance and may even provide an investment element so that, for example, a given sum will be paid out on the death of the insured.

It’s important to check the details of critical illnesses policies to ensure they cover what you think they cover. Don’t worry though, as insurance experts we can help you do this and advise on the most suitable policy for your needs.

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