Term Assurance
This pays a tax-free
lump sum in the event of death and/or critical illness during a
specified period in return for a fixed monthly, or annual premium.
At the end of the term the policy finishes and there is no
investment value.
There are five
types of term assurance available:
The amount
of your contribution depends on:
- the level of
life cover you require - i.e., the amount you wish the plan to
pay out
- how long you
wish the plan to last - usually called its "term"
- your sex
- your age
- your smoker
status, and
- your health at
the time of taking out the plan.
A term Assurance
provides a low-cost means of cover. The policy has no “surrender
value” – in other words, if the insured person survives until the
end of the term, then no payment is made by the insurance company.
You can make a joint application, usually with your spouse or
partner. The annual sum is payable on the first death of
either of the lives assured within the term of the plan.
It is usually recommended that, for a small additional cost,
'waiver of contribution benefit' be included. This to provide for
premium payments in the event of long term ill health or
incapacity and commences after a waiting period of normally 6
months when premiums then are taken up by the insurer on your behalf.
Level Term Assurance
The amount of cover stays constant during the term of the plan.
The contract contains no investment element. If you were to fall
ill after the policy has expired, you could have difficulty
replacing the cover.
Decreasing Term Assurance
This type of plan provides a lump sum payment. It is commonly
associated with mortgages as ‘Mortgage Protection Insurance’ and
it pays an amount that reduces over the term of the policy to
reflect the reducing debt under a repayment mortgage. This results
in lower premiums than level term assurance.
Increasing Term Assurance
This type of policy pays an amount that increases over the term of
the policy, thus helping to counteract the effects of inflation on
the real value of the benefit payable.
Increasing Term Assurance provides for the sum assured to be
increased regularly (without any evidence that the life assured is
still in good health) over the term of the contract (for example,
by 10% per annum), or alternatively offers the option to the
policyholder to make such increases. For this variation on the
basic term contract, the insurance company will charge higher
premiums, which also increase as the sum assured increases.
Convertible Term Assurance
Convertible Term
Assurance allows the policyholder to change the Term Assurance
into either an endowment policy or a whole of life policy with up
to the same amount of cover at any time before the end of the term
of the original policy. This is a valuable feature if the
policyholder’s need is for additional savings (convert to
endowment) or a longer-term protection (convert to whole of life).
Renewable Term Assurance
This policy allows
the clients to effect a term assurance policy for, say, three or
five years, at the end of which the client is then given the
guaranteed right to effect a similar policy for a similar term of
years without having to give the insurance company any evidence
that he/she is still in good health. The short initial term of
years means that premiums are very low, whilst the guaranteed
renewability means that the client will not then be left without
life assurance at the end of the term. Although premiums will be
low for the initial term, the premium rates will increase with age
each time a new policy is taken out under the option, but they are
guaranteed to be normal premium rates provided the initial
proposal was accepted on normal terms.
Finally, you
should note that a number of insurance companies offer contracts
which include two, or even all, of these last three variations.
The premium will normally be higher than that for a basic term
contract, but the client gains added flexibility and guaranteed
future insurability. However, in these circumstances the adviser
should compare the benefits with those available from a whole of
life policy.
We offer an extremely competitive service, so for more information
about Life Insurance and Critical Illness cover contact us on:
Telephone: 0115
945 5199 Fax: 0115 982 6250
Email:
info@davidburnell.co.uk
and we will find a cost
effective solution for you.
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David
Burnell Financial Services Ltd
1 Albert Road, West Bridgford, Nottingham, NG2 5GS
Tel: 0115 945 5199
Fax: 0115 982 6250
Email:
info@davidburnell.co.uk
David Burnell Financial Services Limited is an appointed representative of IN Partnership the trading name of the On-Line Partnership Limited which is authorised and regulated by the Financial Services Authority.
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