What is Life Insurance?

Life Insurance is a form of insurance that pays a tax free lump sum to you or your family if you die whilst the policy is in force.

Life Insurance can also known as “Term” insurance because the policy only remains in force for a pre-determined period of time – its’ “term”.

Very few Companies will offer a policy for less than 7 years and 20/25 years is the most common length of time for a policy to be in force (that is, in technical jargon, the policy’s term). Many Companies will not extend cover beyond the age of 65 but a few will go to 70.

All good Life Insurance policies will include Terminal cover at no extra cost. This is a provision whereby, if a policyholder were diagnosed with a condition from which a Doctor expected him, or her, to die within 12 months of diagnosis, the policy would pay out immediately and not wait for the policyholder to pass away.

You can have a life insurance policy for one or two people (that’s a “joint” policy). If it’s a joint policy, most people elect to have it so that the policy pays out when either of the insured dies or becomes terminally ill. There is another variant however, which only pays out if both policholders die during the policy’s term.

The other two essential aspects are level or decreasing cover. Level cover is where the sum insured, remains constant during the entire period the policy is in force. Decreasing cover is where the sum insured, steadily reduces during the time the policy is in force. This is used, for example, to support a repayment mortgage, where the capital outstanding on the mortgage decreases each month as part of the mortgage repayments repays part of the original sum borrowed.
A Life Insurance policy does not have any investment value. Once the policy comes to the end of its term, that’s it. The policy is complete and finished.

Please be aware that there are other variations and optional extras available with a life insurance contract. MoneyQuest will give you more information.

This web site is owned and managed by Alliance Internet Ltd.

Alliance Internet Ltd is an Appointed Representative of Financial Connexions Ltd. Financial Connexions Ltd is authorised and regulated by the Financial Services Authority.