Life Insurance & Critical Illness Cover
What is life insurance?
Many of us will at some stage in our lives have the need for life insurance. Life insurance can be described as an agreement between you and an insurer and under the terms of a life insurance contract, the insurer promises to pay a certain sum to a designated beneficiary when you die, in exchange for your premium payments.
Why would people need life insurance?
One of the most common reasons for purchasing life insurance is to replace the income lost when you die. For example, say that you work, and that your income is used to support yourself and your family. When you die and your income stops the life insurance proceeds can be used to continue to support the family members you've left behind.
Another use of life insurance proceeds is to pay off any debts you leave behind. For example, mortgages, car loans and credit card debts are often left unpaid when someone dies. These obligations must be paid from the assets left behind but can deplete the resources that your family needs. Life insurance can be used to pay off these debts, leaving your other assets intact for your family to use.
Life insurance provides liquidity to your estate. When you die, you may leave some liquid assets (such as cash and savings bonds), and some illiquid assets (such as property and vehicles). Your liquid assets may not be enough to pay all the debts that you leave behind, plus all the expenses that arise because of your death (for example funeral expenses). Your illiquid assets may have to be sold in order to meet these obligations when they come due.
This could cause a financial loss as the assets could be sold cheaply in order to get the money on time. Life insurance can avert this situation, because the proceeds are generally available almost immediately upon your death.
Life insurance creates an estate for your heirs. After your debts and expenses are paid, there may not be much left over for your family but life insurance can automatically provide assets for them after your death.
What do you need to know about life insurance?
You need to know that there are several kinds of policies that may be available to you, if you are healthy enough.
- Level Term Insurance - A life insurance policy that pays out a lump sum in the event of your death during a specified term, some plans also pay out should you be diagnosed with a terminal illness.
- Decreasing Mortgage Protection – Decreasing Mortgage Protection is a form of life insurance policy designed to cover a capital & interest mortgage, in the event of your premature death, where the lump sum payable decreases in line with your reducing mortgage debt.
- Critical Illness Cover - A critical illness policy provides protection in the event that you suffer a critical illness such as cancer, a heart attack, a stroke, or multiple sclerosis...not a pleasant thought, but at least you'll have the comfort of knowing you can still provide for yourself and your family.
- Family Income Benefit – A Family Income Benefit policy pays out a monthly income if a policyholder dies whilst the policy is in force. The pre-specified monthly income will continue until the policy’s termination date. The payments can be either a flat rate or indexed linked. This type of cover is primarily used to ensure that a family’s income and lifestyle are maintained if the main income provider or providers were to die during the term of the policy. If the policyholder lives to the end of the policy term then no benefit becomes payable. Policies can be held in single (one person) or joint (two people) names.
At Tailored Mortgage Solutions we can advise help make sure that you and your family are adequately protected in the event of a death or suffering a Critical Illness, contact us today or complete an online enquiry form for more information.
