Life Assurance is a policy provided by a Life Assurance Company that pays out either a lump sum or a series of payments if or when you die. These payments are normally paid without the deduction of any personal income tax and in most instances are actually tax-free.

It is extremely important to have life assurance, as we all must consider the impact and consequences our death would have on the people most close to us. It is particularly important to consider the wider financial needs especially if you are the main earner.

Even if you already have a life assurance, with your ever changing family and financial situation it’s even more important to review your current money investment to ensure that your protection needs are fully covered.

There are four main types of Life Assurance

Term Assurance

This is the simplest form of life insurance. You basically pay an on-going fee so that if you die, your family will receive a lump sum pay out. However, you will only get the pay-out whilst you are paying the fee.

Example: You pay £50 per month with the promise that if you die, the company will pay you a cash sum of £50,000.Your family will only get this cash sum if you are still paying your monthly fee at the point of your death

Family Income Assurance

This scheme can provide either an income for your dependents or a lump sum if you should die during the term of the policy. You should note that the income is only paid for the term remaining on the policy so you may need to make additional arrangements to go on providing an income after the policy expires.

Example: You take out a 10 year life assurance policy, with the agreement that if you should die before those 10 years are up, the life assurance company will pay your family £50,000 for every year left in you policy. So if you died after 4 years, you family would receive £50,000 per year for the next 6 years.

Whole-of-Life Assurance

This type of policy is designed to pay out at the time you die whenever that should be. It is guaranteed that on your eventual death the sum assured level of Life Assurance cover will be paid to your Estate

Example: You take out a policy stating that whenever I die, I want you to pay my family £500,000. The life assurance company will then workout how much to charge you per year after assessing various risk factors, like your health, age etc.

Endowment Assurance

Endowment assurance is not only a life assurance policy as you can still receive a pay-out even if you do not die. Should you survive to the end of the policy term then you may also receive a lump sum. This lump sum is known as the maturity value. As there is an investment element within Endowments higher premiums are required to provide for similar levels of Life Assurance protection than an equivalent Term Assurance or Whole of Life policy.

Example: You take out a policy for 10 years stating that whenever I die, I want you to pay my family £500,000. If you die within that 10 years your family will receive the money. However, with endowment policy, you can still receive money at the end of your policy even if you have not died. However, for the purposes of life assurance, it works the same as a Whole of life assurance policy.

In order for your estate/family to get this payment upon our death, you must pay the life assurance company a premium. Premiums are usually paid monthly or occasionally annually and must be maintained in order to ensure cover remains in place. The premiums for Life Assurance policies vary depending on a number of factors including

• ·      The type of Life policy you choose
• ·      Your personal circumstances such as age and medical history
• ·      Whether the premiums are guaranteed or reviewable

If you would like any more information or to set up a Life Assurance policy, please contact us via our Life Assurance page