Life Insurance
(Cover against the financial effects of a death)
A partner or parent dying can have a catastrophic effect on a family’s finances. What would happen to your dependents if you die before your mortgage is paid off? What income would your family survive on if you were to die unexpectedly? Life insurance pays out on death and is there to answer these questions.
In Our advice we suggest sensible levels of life insurance, but the amount you require depends on your individual circumstances. Without it you leave your family financially vulnerable.
Life insurance is relatively inexpensive and there are 3 types, as follows:
Level Term Cover. This provides a lump sum on death within a chosen period. It’s perfect for paying down an interest only mortgage.
Reducing Term Cover. This is also known as Mortgage Protection Insurance. This provides a lump sum, but is cheaper because the amount provided shrinks roughly in line with a repayment mortgage. As few people stick with the same mortgage for the whole initial term of it, this is normally a false economy in our view.
Family Income Benefit (FIB). This provides a tax free income each month over the term of the policy. It’s the right choice if you are protecting a family’s general living expenses. Getting an income from lump sum insurance means paying tax and charges and taking investment risk. FIB avoids all that. It also matches a family’s normal needs very well. Lots of cover now, but as we all get older and hopefully wealthier so the amount needed and the cover provided drops, because it only pays out the benefit to the end of the term. But with interest rates so low, FIB is likely to be of far more value to a family than lump sum cover costing the same amount.
For our recommendations click Our advice.
For more detailed policy information on all covers please see the key features section of the site and scroll through. Or call our advisory team on 0800 975 1202.
