Glossary of Terms
You will probably have commitments: family, mortgage, bank loans, overdrafts, inheritance tax, employees (if you die & the business ceases your employees are entitled to redundancy from your estate)
Excuses for not having life assurance are:
When I die the spouse can remarry and the new partner can pay to bring up the kids' - all heart!
I did not realise the bank could get the house, the savings, the holiday home etc.
I forgot to insure my income.
I didn't think as a single person I needed any form of protection.
Cheap, no cash-in value, you pay a set premium for an agreed term will assure a guaranteed sum.
Same as above, but the sum assured decreases in line with the mortgage debt, but the premium remains level throughout the term.
Sometimes known as permanent health insurance. After a specified deferred period of (3,6 or 12months) the policy pays out a tax free income until expiry or untill you return to work.
Family income plan
Pays out in the event of death, an annual sum of money until the expiry date of the policy. Quite good for covering maintenance payments.
Living life assurance pays out a sum in the event of the assured person contracting 1 of 23 medical conditions i.e. heart attack or cancer. It does not pay out on death unless linked to a life policy.
Adding this to your life or mortgage term assurance is quite cheap, as opposed to having a stand alone policy.
Term assurance used in covering taper relief of 7 years in inheritance tax planning.
An option usually added free of charge to term/mortgage plans. If the life assured is diagnosed as being terminally ill at least 18months prior to expiry the policy pays out.
Whole of life
As it says, the policy remains in force until the life assured dies or surrenders the plan.
It is a unit linked policy, which means the premium buys units in a fund which then in turn sells units to pay for the life cover.
Most plans are bought on the basis of a small premium for a lot of life assurance. At the 10th anniversary the policies are reviewed, any discrepancy in the premium can be adjusted at this time. The plans are regularly reviewed to make sure the premium can sustain the life cover .
IHT is a useful planning tool as it can be written with joint life and 2nd death.
Waiver of premium
Insurance of the premium. If you are off work through an accident or sickness the policy pays out after 6mnths, and pays the premium to expiry of the policy, or your return to work.
You could be rated through a medical condition or through the type of work you do and where you work. This essentially assesses your risk of death. The rating is a defence mechanism by the insurer. Because of this they will not be prepared to offer you the same terms as other plan holders who are less at risk.
We have regularly referred to the above, at Financialsmiles we only policies with a guaranteed premium a guaranteed sum assured. Plans with re viewable premiums / sum assured benefits (apart from whole of life) are not in your best interest. All plans apart from whole of life have no cash in value.