Life Insurance otherwise known as “Term Insurance” provides a tax-free lump sum in the event of death or diagnosis of a terminal illness during the policy term. The cost of life insurance is determined by factors including age, health, occupation and lifestyle. The amount which is paid out and the length of time insured are selected by the applicant at the point of inception. However, policies are generally not available beyond the age of 90 and should cover be required beyond this age a Whole of Life Insurance policy should be considered.
What does it cover?
Life Insurance is commonly put in place to pay off financial liabilities that family may inherit such as mortgages and debts. It is also often used to provide lump sums to assist with the cost of bringing up children or funeral costs. However this product may not be the most appropriate or cost-effective solution for these purposes.
How do you apply?
Application for cover involves a health questionnaire which in the majority of cases is sufficient for protection to be offered. However, in circumstances involving current or historical health issues further evidence may be required which will be requested free of charge from the customers GP on their behalf.
Cover is often instantaneous with no qualification period applying. Therefore, should a policy be taken and a claim made the very next day, even though no payment for the policy may have been made by the customer, they would still be eligible for a pay-out in full.
A common misconception about life insurance is that it is in place for “life”, although more often than not, when paper work is checked this is not the case. Should the insured outlive the expiry date of the policy the cover ceases. This not only leaves the policy holder uninsured they will often be considerably older than when they originally put the policy in place. This can significantly increase the cost when reapplying. In addition, when reapplying changes in health must be disclosed which could result in further additional cost, exclusions being applied or worse still having the application declined.
Considering death and subsequent impact on family is not pleasant and for this reason many shy away from the subject. However, this approach often leads to not having appropriate protection in place and therefore leaves loved ones at risk.