Financial products are sometimes at their most useful when they are protecting our families, our incomes or our property. Whilst insuring ourselves against an undesirable event such as sickness or even death may not be a pleasant thing to think about, the benefit of being able to set financial issues aside at emotionally difficult times cannot be overlooked.
There are many ways in which a family can protect itself, and because of the large range of products available there is usually an appropriate policy for most circumstances, and most budgets.
Life Protection Options
There are several ways in which to protect yourself and your family in the event of an untimely death. Most people take out life assurance to provide for their families and alleviate any financial worries at a difficult time.
Assurance pays a lump sum in the event of death during the term of the policy. There is no investment element within a term assurance contract so at the end of the term there is no maturity value and life cover ends. The benefit is paid tax free and premiums are usually monthly, and fixed throughout the term. Because the term and benefit are known from the outset, and there is no investment content, term assurance is a cost-effective method of protection.
Decreasing Term Assurance
Similar to Level Term Assurance, but the benefit is set at the outset and gradually decreases over the term of the policy. These policies can be used as cover for a repayment mortgage, or other loans where the amount of capital outstanding also decreases over time. Because the benefit reduces over time, the premiums are usually lower than for Level Term Assurance.
Family Income Benefit
Works the same as term assurance but instead of paying a lump sum upon death, it will usually pay a regular monthly/annual tax free income in the event of death to your dependants up until the end of the term of the policy.
Critical Illness Insurance
This is available as an addition to all term assurance plans but can be bought on a stand alone basis. Critical illness provides a lump sum benefit / income in the event of diagnosis of certain critical illnesses, such as Heart Attack, Stroke, Transplant, Blindness, Total & Permanent Disability and so on. The illnesses covered will be specified in the policy along with any exclusions and limitations – these differ between insurers.