Life Insurance

Life Insurance is crucial to securing the financial future of your dependants.  In the event of your death , your dependants e.g. a partner or children, will receive a lump sum or regular payments to help them cope financially. This money would help to cover any outstanding debts and the remainder would act as inheritance for the dependents or a lifestyle buffer for a surviving spouse if they cannot work due to childcare commitments.

Life Insurance policies separate into three categories, Decreasing Term Life Insurance, Level Term Life Insurance and Whole of Life Insurance policies.

  • Decreasing term life assurance policies pay out an amount which reduces over time, resulting in cheaper premiums than with level term life insurance. This is generally used to cover a mortgage where the pay out sum reduces in line with the mortgage debt, and the term of the policy will match that of your mortgage.
  • Level Term Insurance policies pay out if the life assured dies within a fixed amount of time, for example 10 or 25 years. However, if the holder doesn’t die within this time frame there is no lump sum available at the end of the policy.  As it’s name suggests, the amount of cover provided by this kind of policy does not change over time, so it won’t increase in line with inflation, and the premiums won’t change – it simply lapses at the end of the term.
  • In contrast, Whole of Life policies will pay out regardless of when death occurs. Because there is no set term and the cover could potentially span several decades, monthly premiums tend to be higher than with fixed term policies. Whole of Life policies aren’t directly linked to financial markets, and are therefore deemed as investment risk free products and can be used as good diversification assets within an overall portfolio. As they are guaranteed to pay out as long as you keep up premium payments, they can be used as estate planning tools, specifically to pass on as a financial legacy to your loved ones, or to pay an anticipated inheritance tax liability.

Ultimately, the amount you pay for your life insurance every month will be defined by a number of factors, including the size of the cover you need, the length of time you want the policy to run for, your age and your health…so the earlier a life insurance policy is taken out, the better for you and your dependants.

For more information, please get in touch.

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