Insurance (Assurance) - Definition:
term 'assurance' is used to describe a policy
that is certain to pay out at some stage (e.g. upon
death) whereas 'insurance' is used when a policy
may pay out (e.g. home insurance, term-insurance etc.).
Life assurance or Life Insurance is also known
colloquially as 'Life Cover' or 'Whole of Life Cover'.
Life Assurance is inarguably one of the cheapest ways to protect
your family's income if the worst happens.
Term assurance is a life insurance policy that pays out to
your dependents if you die, but note the two keys words: 1)
Term: This means you only get a payout if you die
within a fixed term e.g. 10 years or whatever else is written in
Level: This means that the payout which is made
doesn't vary, it's always at a set pre-agreed amount.
level term assurance guarantees a lump sum payout upon death
within a fixed period of time
life assurance is an open-ended policy often used for
inheritance tax planning purposes and pays out a fixed amount
when you die, rather than after a fixed period of time.
If you're a
single person with no dependents, then you most likely won't
need life assurance and you will be far better off by focusing
on your own finances.
everyone else, the basic question to ask yourself is: 'What
would happen financially to the people around me if I died?'
- and perhaps: 'Do I care enough to do something about it!'.
answer is there'd be little financial impact, then you probably
don't need a policy - but if your loved ones would have to
struggle, then there is a strong reason to consider life
should aim to pay-off any outstanding debts and provide your
dependants with a reasonable standard of living.
If you are
still in employed work you should check whether your employer
already offers you any ‘death in service' benefits. Remember
that cover may also be needed for your spouse.
The cost of
cover, not surprisingly, increases with the likelihood of death
within the stipulated term. So, a 98-year old, tobacco-chewing
racing driver who likes to go cage-less shark diving, may
struggle to find appropriate cover for herself.
It is worth
noting that If you're over 50 and have (relatively minor) health
issues (or you don't want to disclose them) an Over 50 Life
Policy is an option as they generally do not require you to
answer any health questions and there is guaranteed acceptance
up to age 80 or 85.
compensate for the lack of information they are MUCH more
expensive and you can't claim in the first one or two years.
go for either separate or joint policies which pay out on the
joint policy would only be suitable if you need it to pay out
the same amount for both partners. Even if a joint policy does
look suitable, it's worth getting quotes for standalone policies
anyway, as it's often cheaper.
Important Issue of Underwriting
you will see plenty of adverts everywhere with offers of Live
Cover starting from £4.50 or less a month - do not be fooled.
these offers are genuine enough, they only apply to 21-year old,
super-healthy females living entirely healthy lives without any
exposure to any dangers by way of pastimes, travels, sport,
employment etc. and preferably living on an Island without
traffic, storms, lightning, heavy rain, excessive sun, heavy
people would consider life insurance is something one can ponder
the vast majority of 'normal' people the actual life cover
premiums will depend on a wide variety of factors; the most
important being: age, health, family history, lifestyle,
or perceived, factor that may impact on your lifespan will
affect the price of cover that you will be quoted.
If there is
evidence of more significant medical problems (or e.g. hazardous
pastimes etc.) specialist underwriting may be required and the
question of whether or not you can get cover will be determined
based on an individual assessment.
speaking, you need to be really quite ill to be refused life
cover, but even if you can get cover, the premiums may be
prohibitively high and may differ very significantly between
providers. In such cases it is of particular importance to have
contact to the right adviser. Norwich Financial Advice has
contacts to a number of specialist underwriters as well as the
full range of providers of 'ordinary' life insurance policies.
Is it worth switching?
already have a level term policy it may well be that cheaper
option (with the same level of cover) is available as prices
have reduced significantly in recent years.
your existing policy was bought many years ago or you have
experienced health problems since, the possible savings from
switching to a cheaper policy may well be cancelled out by the
fact your risk level has increased.
Insurance written in trust.
If you die,
the payout from your life assurance will normally form part of
your estate which means that it potentially may be liable for
40% Inheritance Tax.
cases it is possible to avoid this by writing the policy in
trust, as long as this is done at the time the policy is taken
means that the insurance pays out directly to your dependents,
so it never becomes part of your estate thus avoiding
inheritance tax altogether and also helps to speed up the
In Feb 2011 the EU Court ruled that from Dec 2012 gender
must no longer be factored into insurance costs meaning that
life cover prices could rise sharply.
men have paid more for life insurance as their risk of dying
within the term is higher than those of women (assuming similar
age at the time of application).
equality now means that women's costs will likely rise and even
though the rules don't change yet, as life insurance policies
often last 20 years with guaranteed prices, price hikes are
expected soon adding possibly as much as 10% to the cost of
access to a wide variety of Life assurance providers and can
help you in deciding upon the most appropriate terms and levels
A FREE INDEPENDENT LIFE COVER QUOTE please feel free to contact
NFA on the phone number or e-mail address found at the bottom of
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