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Life assurance is a policy that offers
a one-off payment or an income after the death of the person named in
the policy. If you’ve seen the first Harry Potter movie -
or read the book - then you’ll be familiar with the scene in which
Hagrid accompanies Harry to the bowels of Gringott’s bank.
Here, the giant shows the orphan an enormous pile of gold coins. 'Didn’t
think yer parents would leave you empty-handed, did you, 'Arry?' asks
Hagrid.
When all is said and done, we all arrange life cover either because we
have to or because we want to make sure our surviving family are
properly looked after if we were to die. But
how much gold are you likely to generate?
The bad news is that even if you already have life insurance, chances
are it won’t be adequate. The good news is that
now is a great time to look for a better deal.
Why? Because the cost of life insurance cover is at an historic low*
Providing you’re in good health, if you took out life cover a few years
ago, in many cases, you’ll find it’s cheaper now to get the same amount
of cover. Even though you’re older and, in theory, a greater actuarial
risk.
*Source -
www.channel4.com/4money March 2005
Life & Critical Illness Quotations
assurance
Term life assurance is the simplest - and cheapest - form of life
insurance. Basically, you decide the amount of money you want your
nearest and dearest to get in the event of your premature demise.
Term life insurance pays a tax-free lump sum in the event of death
within a specified period of your choice (known as the 'term'). Fixed
monthly - or annual - premiums are paid for the duration of the term.
A whole bunch of variables - your age, gender, state of health, previous
ill health, the term you require - determines how much the premium will
be.
You’re covered for as long as you pay the monthly premiums. If you stop
paying the premiums, the policy terminates. With this form of life
insurance, there’s no investment element.
If the cover is being arranged to cover a repayment mortgage, one
further way to reduce your premiums is to set up what is commonly
referred to as Mortgage Protection Assurance or Decreasing Term
Assurance.
With this type of plan, the amount you are covered for reduces each
year in line with the balance of your repayment mortgage. The amount
your cover reduces by is calculated by the insurer assuming that
interest rates will not rise above a certain level, normally 10%. Your
adviser and the illustration you receive for your plan will be able to
tell you what rate of interest has been assumed, however, it is often
fair to say that the higher the interest rate assumed the better.
There are plans that offer a 'mortgage repayment guarantee'. With
these plans, the amount that is paid out is guaranteed to be enough to
pay off your mortgage, no matter what has happened to interest rates.
Your About Mortgages adviser will be able to tell you which insurers
provide these plans and you will often find that they charge a very
similar premium to those plans that do not offer the same guarantee.
Sadly, almost nobody has as much life
insurance as they think they have.
Many people insure their lives for £100,000 because it sounds like a lot
of money - and it is.
But is it enough for surviving dependants to live off? Can it pay off
all your mortgages, loans and credit cards and still leave a big enough
sum to generate an income for them to maintain their standard of living?
After all, even if the mortgage is paid off,
the other bills still keep coming in, and some (for example child care)
could actually rise in a single parent family.
To calculate the amount of cover you need, a budgeting exercise should
throw up the amount of money a household requires to maintain its
standard of living for a year.
Why not use our Life and Critical Illness Calculator to work out how much cover you
require, or
obtain Life & Critical Illness Quotations
Please remember that
the amount of life and critical illness cover you need should be
reviewed regularly and as your financial circumstances change. If you
are unsure of the amount of cover or type of policy you require you
should
complete an advice request to arrange a no obligation review of
your needs.
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