UK Life Insurance Explained

life insurance quite simply pays out on the death of the life insured, if this occurs during a pre-determined period. This type of life insurance can be used to protect a mortgage and will pay out a lump sum to repay an outstanding mortgage. It can also be used to protect your dependants in the event of your premature death. Life insurance can also be used to protect against inheritance tax should you make any lifetime gifts.

The second cover available is critical illness insurance; this pays out a tax-free lump sum if you are diagnosed with a serious illness. It is normally sold with life insurance included and will pay out on first event i.e. Death or critical illness whichever occurs first. Like life insurance it can be used as a mortgage protection or to protect your family. It can also allow clients the luxury of not having to return to work so quickly following a serious illness.

Third protection available is income protection which will protect your earnings in the event of you being unable to work through accident, sickness or disability. This will pay you a tax-free lump sum monthly after a pre-determined deferred period. Cover is available that will protect you through to retirement.

Another cheaper alternative to both types of income protection is ASU insurance, Accident, Sickness and Unemployment insurance. This policy will pay a monthly benefit after usually 30 days and lasts for a maximum of 1 year. For Accident, Sickness and Unemployment cover we usually offer products from a selected panel of providers.

What is discounted life insurance?

Discounted life insurance is when you pay less on your premiums for a life insurance policy through a broker than you would direct to the provider, yet still receive the same level of cover.

It is an interesting fact of the financial products business that if you buy a product direct from it's provider, it could be more expensive to you. Unlike other businesses, where cutting out the middleman should reduce the cost to a customer of a product, adding a middleman can actually make it cheaper. Sometimes, the middleman helps the product provider by taking work off them and introducing customers.

The life insurance business is one of these. There are many product providers, and they pay a commission to life insurance brokers if someone takes out a policy through one of them. It is how the broker uses that commission that determines whether they are to offer their customers discounted life insurance.

If you take out a policy direct from a provider, they incur the administration costs that would normally be incurred by a broker, so they do not have as much of a saving as you would imagine. Therefore, it is unlikely you would find a discount price on your premiums.

What is Level term assurance?

Level term assurance is a fixed term policy, meaning that the assurance will last for a certain period of time. The policy will pay out a guaranteed sum assured that will be paid only on death during the fixed term. Should the person assured survive, there will be no benefit. It is very important to understand the concept that if you are to live until the end of the term, your policy will expire and not payment will be made. There is no surrender value either, so if you stop paying the premiums at any time, your cover will cease. Sometimes, you can ask for a waiver of premium, which is where you pay extra as a sort of assurance so should you lose your job during the term, you can take a break from paying premiums but still be covered.

What is critical illness insurance cover?

Critical illness life insurance cover (also known as 'dread disease cover') is a policy that insures you should you suffer a critical illness. The critical illness must be a specified medical condition, such as some forms of cancer as specified in the policy documents. The critical illness insurance policy will pay out a lump sum on the diagnosis of one of the specified medical conditions. Critical illness insurance policies can be 'stand alone' in that you would take them out by themselves, or can be added on to whole of life, endowments or term insurance policies. This is particularly useful in the case of term insurance policies, where your survival of the term means that you receive no benefits. If during the term you are diagnosed with a critical illness, the cover will be vital.