Types of Life Insurance Cover

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By Crispin Bateman

on Tuesday 3 April 2018

It is never nice to think of the worst things happening, but as specialists in insurance that’s what we have to do - a lot! Car insurance is most often there for when you’ve been involved in a car accident, home insurance can come to the rescue in the event of a burglary. Travel insurance picks you up after an excitedly anticipated break turns into a desperate need for medical assistance in a foreign land, and life insurance?

Life insurance provides financial stability for your family on your death, and honestly, no one really wants to contemplate their own end.

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Avoidance is Not the Best Policy

It’s difficult to think of mortality when we are young, and it’s a rare 20-something who has put in place life insurance cover for a family that may not be anything more than conceptual! However, there are a number of strong reasons for taking out a life insurance policy sooner rather than later:

Guaranteed premiums

Life insurance premiums are locked at the time of taking out the policy and are based on your age and health. A younger policyholder is going to be paying considerably less for the same cover as a person even ten years their senior. Taking out life insurance cover during your 20s will save you hundreds of pounds in premium payments each year.

Good health equals low costs

Most people are at their fittest during their youth – not only have they got age on their side, but they generally don’t smoke, haven’t become raging alcoholics and are yet to finish their thousandth pizza! This type of health status translates immediately to lower premiums.

Something could happen tomorrow

We don’t like to think of it, but life is full of risks (which is why life insurance exists!). Often, advisors hear tales of people who were planning to get life insurance and put it off day after day - then something happened and they unfortunately left their family without any adequate financial protection.

So don’t put it off – sort your life insurance out today!

Decreasing Term Assurance (DTA)

This is by far the most common type of life insurance - required to cover mortgage payments and secure the family home if the worst happens. Decreasing term assurance is a cost-effective life insurance policy tied to the remaining mortgage amount. It is called ‘decreasing’ as the sum assured (the amount paid out) is lowered as the months go on to match the remaining sum of the mortgage.

This way it’s always of a size suitable to clear any outstanding mortgage payments while reducing the risk for the insurers - resulting in a lower overall premium.

DTA is surprisingly affordable and a definite must for anyone with a mortgage and dependants.

Level Term Assurance (LTA)

Designed more to provide a set lump sum to your loved ones in the case of your passing, level term assurance guarantees a set sum for a set time – for example, £300,000 until you are 90. LTA premiums are often considerably more than an equivalent amount of DTA cover, but the amount that is paid out never decreases.

Level term policies are usually put in place to cover family expenses upon an unexpected death, such as university fees, or providing children with a start in life.

Whole of Life                 

Whole of life cover is best seen as funeral cover. Usually for lower pay out amounts than LTA, it runs until the day you die, no matter when that is, and makes sure that your family do not have to shoulder any costs associated with your death. Whole of Life premiums can be expensive, as they are guaranteed to pay out in every case - thus it is not cover that tends to be tied to larger pay outs.

Over 50s

It can be difficult to get life insurance as time goes on, with health questionnaires rarely simple affairs. For those over 50 who are looking to get cover despite pre-existing medical conditions, over 50s cover guarantees a whole of life level of insurance without delving into your medical history.

To cover the higher risk, over 50s policies tends to have larger premiums than the alternatives, but anyone over fifty is guaranteed cover, no matter what.

For help with any life insurance questions and putting a policy in place that meets your unique personal situation, call an insurance broker today. They will study the market and offer impartial specialist advice to find the very best quote for you!

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