Insurance

Life insurance was created by insurers to protect customers against the financial consequences of unexpected events that they may experience at some point during their life. It is one of the oldest forms of insurance but has been updated to provide more appropriate cover for modern day living.

In essence, a life assurance contract is between the insurance company and the policyholder. The policyholder agrees to pay the insurer a monthly premium and in return the insurer will make a payment in the event of a successful claim.

At some stage in your life you are likely to need life insurance. Key reasons for investing in life insurance are a mortgage, getting married and having children. In the event of your death or inability to work due to a disability your dependents will be financial stable enough to continue to live the lifestyle to which they will be accustomed and pay the mortgage.

There are 4 types of life insurance:

•  Level Term Assurance: Generally speaking l evel term assurance will pay out in the event that the policyholder dies or on the diagnosis of a terminal illness first identified during the term of the policy. If the policyholder is still alive when the policy term expires no payment will be made.

•  Mortgage Protection: Mortgage protection is a form of life assurance but is specifically designed to cover a capital and interest mortgage. The policy will ensure the mortgage holder (or their spouse) can continue to make payment in the event of premature death. The sum insured will decrease in line with the reduction of mortgage debt.

•  Critical Illness: Critical illness insurance has grown in popularity as medical advances have enabled people to live longer and survive conditions such as cancer or strokes, but not recover sufficiently for them to return to work. A critical illness policy will pay out a lump sum in the event the policyholder can no longer work.

•  Whole of life policies: Whole of life policies will pay out a lump sum in the on death of the policyholder at any time. Whole of life policy payments made by the insurer will depend on the type of policy. A ‘non-profit' policy will be fixed at the same level throughout, whereas a ‘with profits' policy will increase the sum assured at regular intervals. The final whole of life policy option is to take a ‘u nit linked' policy which will link the value of the sum assured to the value of the investment.