Protection

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Protection

Often people have a need to ensure there is an amount of money available in the event of their death, and life insurance can provide this cheaply and effectively.

If you have a mortgage and die, the loan is not paid off – it still needs to be repaid, either all at once or maintaining the monthly interest and repayment terms of the mortgage. Your partner may be unable to pay for the mortgage if you were to die, and the lender may insist upon some form of life cover to reassure them that the loan amount is covered if you die. Either way, appropriate life cover being in place will pay off the loan, so your lender is assured and your partner knows that they will not have to worry about repaying the mortgage from their income alone if you were to die.

You may have other debts that would arise upon your death that you want to deal with before you die. For example funeral costs alone can be significant, but there may also be tax to pay – especially Inheritance Tax – that can amount to a large sum, and you may not wish to burden your remaining family with having to pay that from the estate you leave.

It may also be that you wish to provide someone with a capital sum in the event of your death in addition to the amount that would be used to repay loans. For example, to provide them with a regular income in the event of your death, to make sure they are comfortable. Life cover can also achieve this.

Protecting your life and your livelihood can be a big priority for many people, and this subject takes on many forms. The key types are:

Life cover for a specific term: Term Assurance

This is a lower cost option as it will only pay the insured sum if the life assured dies within the term of the contract. This is commonly used to provide your loved ones with a lump sum in the event of your death in the following circumstances:

  • To cover debt – loans or mortgage
  • To enable them to live off capital for the rest of their lives
  • To provide capital to pay for specific events, such as education costs, if you are no longer alive to pay for them

Life cover upon death, whenever that occurs: Whole of Life

This cover is greater cost than term assurance, as payment of the sum insured is guaranteed – irrespective of when the death of the person covered happens. There are many circumstances when this will be more appropriate:

  • Passing of a legacy amount to family members upon death
  • Guaranteed payment of a tax amount due – in particular Inheritance Tax
  •