Life cover is strange thing to buy. You commit to pay out every month to buy something that you have no prospect of seeing the benefits of.
Of course, if you have a partner, children, or other relatives depending on you, you need life cover to help provide for them in the event of your death. As a result, most people have life insurance.
But life insurance is not the only type of life cover there is.
Many people get cover with their first mortgage. Coming to independent financial experts like Continuum can provide it for less than your mortgage broker will arrange.
Will your cover run out?
The peace of mind provided by life cover may be priceless, but most of us need to watch the costs, particularly if we are protecting a new home and family. So many people choose term cover, or life insurance. This can be arranged to run to a set date, such as your target for paying off the mortgage or your retirement.
Costs can be kept under control, because it is possible to calculate the chance of you dying while cover is in place. The provider knows that in a large proportion of cases, they will not need to make any payment at all. You may be happy to have outlived your cover, and with your home paid for and the children flown the nest and a pension to provide for your partner you might feel that your need for cover is passed.
But it may not always be appropriate to let your cover run out.
Life assurance – cover working for you
Life assurance is a little different from life insurance. Both provide cover in the event of your death, but Life assurance is ‘whole-of-life cover’ and designed to last for the rest of your life.
There’s no term limit, so your beneficiaries are guaranteed to receive the pre-agreed amount when you die. Some plans require you keep paying until you die. Others have a cut-off point so that when you turn 85 or 90 years your cover continues but you no longer need to pay.
The monthly premiums are higher than term insurance because the providers know that they’ll have to pay out eventually. But the extra cost can be worth it for two very good reasons.
- If you will still have people who rely on your financial support in your later years, term insurance could leave them unprotected. Life assurance would ensure that they would be provided for no matter how old you were at the time of your death.
- Secondly, life assurance can be a way of protecting your estate from inheritance tax. The payment from a life assurance policy can be written in trust, and therefore tax free. This can mean that it can be ideal to help dependents pay off inheritance tax.
This is becoming a major reason for buying life assurance – although expert advice is vital to make this an effective way to avoid ‘death duties’.
What cover do you need?
As the Covid emergency has shown, none of us know what is around the corner, and the right life cover is vital. Even if you have cover, it could be time to review it, and if you don’t, it is almost certainly time to start.
With the pandemic showing how vulnerable we all are, many more people are looking at cover to protect themselves and their loved ones, and providers are offering new terms and products. Getting an independent expert to find the cover that is right for you and your family has never been more important.
We can help you see if life insurance or life assurance is the right answer for you, and help you cut the cost of securing it.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable Protection products or investment strategy, you should seek independent financial advice before embarking on any course of action.
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