What is life assurance
Most people who are married or who have any dependents would be horrified by the thought of their untimely death leaving their family with hefty bills to pay, an outstanding mortgage to struggle to meet, or a sudden decline in their standard of living. Life assurance - which guarantees an agreed lump sum benefit in the event of the policy holder's death - is designed to take the sting out of just such worries.
You will probably have noticed this type of insurance variously described as life insurance or life assurance and you might have wondered why. The reason for the distinction - which these days is often blurred - arises from the fact that insurance is about the risk of something happening. Death, on the other hand, is the one certainty that all of us can count on as happening at some time. The description life assurance, therefore, was coined for the contract under which a life assurance company agreed to pay out an assured sum upon the policy holder's death.
To add a little more confusion to the picture, most life assurance sold today takes the form of term life assurance. With term life assurance, cover is extended for a predetermined number of years and if the policy holder dies within that period, the assured lump sum is indeed paid. If the policy holder survives the agreed term, however, then no benefit at all is paid. It could be argued that this arrangement is indeed life insurance, since the risk is being taken whether or not the policy holder will die within the term of the insurance. Purists might argue, therefore, that the label "life assurance" should be reserved for something called whole-of-life assurance which pays a lump sum to the policy holder's beneficiaries at whatever time death occurs.
Suffice it to say that the terms life assurance and life insurance are, in common usage, practically interchangeable. As noted, whole-of-life assurance will almost always pay out, so its premiums tend to be somewhat higher than standard term life assurance. Whole-of-life assurance is also generally packaged with an investment plan, designed to enhance the final payout, and this too increases the price of the premiums.
Standard term life assurance, however, remains remarkably cheap. Indeed, it is one of the few products in any market which has actually come down in price over the past decade. The level of benefits payable under a term life assurance policy are directly proportional to the level of premiums paid, so it is very much a question of choice as to how much protection is bought. It also comes in a number of different types, to suit a variety of personal circumstances.
The most popular variation is level term life assurance. It is called level term because the assured lump sum benefit remains the same throughout the insured term. Decreasing term life assurance, on the other hand and just as its name suggests, offers a decreasing death benefit during the course of the term. With a steadily decreasing sum at risk, the life assurance company can charge an even lower premium, making this the ideal choice for someone who wishes to ensure that a standard repayment mortgage (on which the balance is also steadily decreasing) is fully paid off in the event of their death. For those who want to build in some degree of increasing benefit, there is either increasing term life assurance (with the lump sum benefit increasing by predetermined annual increments) or index-linked term life assurance
Most people who are married or who have any dependents would be horrified by the thought of their untimely death leaving their family with hefty bills to pay, an outstanding mortgage to struggle to meet, or a sudden decline in their standard of living. Life assurance - which guarantees an agreed lump sum benefit in the event of the policy holder's death - is designed to take the sting out of just such worries.
You will probably have noticed this type of insurance variously described as life insurance or life assurance and you might have wondered why. The reason for the distinction - which these days is often blurred - arises from the fact that insurance is about the risk of something happening. Death, on the other hand, is the one certainty that all of us can count on as happening at some time. The description life assurance, therefore, was coined for the contract under which a life assurance company agreed to pay out an assured sum upon the policy holder's death.
To add a little more confusion to the picture, most life assurance sold today takes the form of term life assurance. With term life assurance, cover is extended for a predetermined number of years and if the policy holder dies within that period, the assured lump sum is indeed paid. If the policy holder survives the agreed term, however, then no benefit at all is paid. It could be argued that this arrangement is indeed life insurance, since the risk is being taken whether or not the policy holder will die within the term of the insurance. Purists might argue, therefore, that the label "life assurance" should be reserved for something called whole-of-life assurance which pays a lump sum to the policy holder's beneficiaries at whatever time death occurs.
Suffice it to say that the terms life assurance and life insurance are, in common usage, practically interchangeable. As noted, whole-of-life assurance will almost always pay out, so its premiums tend to be somewhat higher than standard term life assurance. Whole-of-life assurance is also generally packaged with an investment plan, designed to enhance the final payout, and this too increases the price of the premiums.
Standard term life assurance, however, remains remarkably cheap. Indeed, it is one of the few products in any market which has actually come down in price over the past decade. The level of benefits payable under a term life assurance policy are directly proportional to the level of premiums paid, so it is very much a question of choice as to how much protection is bought. It also comes in a number of different types, to suit a variety of personal circumstances.
The most popular variation is level term life assurance. It is called level term because the assured lump sum benefit remains the same throughout the insured term. Decreasing term life assurance, on the other hand and just as its name suggests, offers a decreasing death benefit during the course of the term. With a steadily decreasing sum at risk, the life assurance company can charge an even lower premium, making this the ideal choice for someone who wishes to ensure that a standard repayment mortgage (on which the balance is also steadily decreasing) is fully paid off in the event of their death. For those who want to build in some degree of increasing benefit, there is either increasing term life assurance (with the lump sum benefit increasing by predetermined annual increments) or index-linked term life assurance
Comparing life insurance using the Internet
Competition in the market place has made life insurance one of the most reasonable and best value products available. With such a huge number of offerings, however, it can prove a little daunting to compare life insurance. Nevertheless, with a little care and a clear picture of your particular needs, it is almost certain that there will be a product just right for you.
One of the beauties of life insurance is its simplicity. Provided the premium payments are maintained, the policy will pay out in the event of the policy holder's death. In the case of whole-of-life insurance, the payout is assured whenever the policy holder dies; in the case of term life insurance, the benefit is paid only if the policy holder dies within the term of the insurance (if he or she survives the agreed term, then nothing is payable).
When comparing life insurance, as with any other product, it is important to compare like with like. In the case of life insurance, therefore, remember that your age at the commencement of the cover is critical. The younger you start, the cheaper the premiums will be.
Naturally, the price you are prepared in premiums will directly determine the benefits payable under the policy. When comparing life insurance products, however, it is also worth remembering that what seems like a suitable and sufficient level of cover this year will almost certainly fail to provide the same real level of protection ten or fifteen years down the line. Instead of standard, level term life insurance (where the benefits payable remain the same throughout the term), therefore, it might be worth considering the option for updating and enhancing the level of cover provided.
This can be achieved by one of two ways: either through an increasing term life insurance - where the premiums and benefits payable are increased by a predetermined increment each year - or through an index-linked term insurance where premiums and benefits are adjusted throughout the term according to changes in the rate of inflation. With either of these options, however, it will be important to find out whether the adjustments are made automatically or whether you will need to contact your insurers with instructions to vary the premium rates and benefits.
A common question is about how much life insurance cover should be taken out. This will depend entirely on your present circumstances and the actual protection you would want to provide your beneficiaries in the event of your death. The calculation typically takes into account any outstanding mortgage or other large debts, an effort to replace the principal breadwinner's regular salary, and provision for childcare or education expenses if there are children in the family. Although by no means a rigid rule, many people find that life insurance cover of at least ten times the principal breadwinner's salary is a reasonable benchmark.
Naturally, you will want to make the right decisions about a product as essential and important as life insurance. A specialist insurance broker can help you to do this by bringing to bear his or her extensive knowledge of the insurance market.
Competition in the market place has made life insurance one of the most reasonable and best value products available. With such a huge number of offerings, however, it can prove a little daunting to compare life insurance. Nevertheless, with a little care and a clear picture of your particular needs, it is almost certain that there will be a product just right for you.
One of the beauties of life insurance is its simplicity. Provided the premium payments are maintained, the policy will pay out in the event of the policy holder's death. In the case of whole-of-life insurance, the payout is assured whenever the policy holder dies; in the case of term life insurance, the benefit is paid only if the policy holder dies within the term of the insurance (if he or she survives the agreed term, then nothing is payable).
When comparing life insurance, as with any other product, it is important to compare like with like. In the case of life insurance, therefore, remember that your age at the commencement of the cover is critical. The younger you start, the cheaper the premiums will be.
Naturally, the price you are prepared in premiums will directly determine the benefits payable under the policy. When comparing life insurance products, however, it is also worth remembering that what seems like a suitable and sufficient level of cover this year will almost certainly fail to provide the same real level of protection ten or fifteen years down the line. Instead of standard, level term life insurance (where the benefits payable remain the same throughout the term), therefore, it might be worth considering the option for updating and enhancing the level of cover provided.
This can be achieved by one of two ways: either through an increasing term life insurance - where the premiums and benefits payable are increased by a predetermined increment each year - or through an index-linked term insurance where premiums and benefits are adjusted throughout the term according to changes in the rate of inflation. With either of these options, however, it will be important to find out whether the adjustments are made automatically or whether you will need to contact your insurers with instructions to vary the premium rates and benefits.
A common question is about how much life insurance cover should be taken out. This will depend entirely on your present circumstances and the actual protection you would want to provide your beneficiaries in the event of your death. The calculation typically takes into account any outstanding mortgage or other large debts, an effort to replace the principal breadwinner's regular salary, and provision for childcare or education expenses if there are children in the family. Although by no means a rigid rule, many people find that life insurance cover of at least ten times the principal breadwinner's salary is a reasonable benchmark.
Naturally, you will want to make the right decisions about a product as essential and important as life insurance. A specialist insurance broker can help you to do this by bringing to bear his or her extensive knowledge of the insurance market.