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Types
of Life Policy
Optional Extras & Glossary
Please click
on the headings to view a description.
Mortgage Protection
These plans are commonly used to protect a 'repayment' style
mortgage i.e. where your debt to the lender reduces over the mortgage
term. If you die during the mortgage term, the 'mortgage protection'
policy produces a lump sum which is used to pay off the outstanding
balance of your mortgage.
Over the plan term, the amount of life cover reduces to match your
outstanding mortgage loan - this helps keep the cost down as you
are only paying for cover you need. This is usually the cheapest
way of insuring your repayment mortgage.
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Level Term Assurance
These plans
are commonly used for family protection. If you die during the plan
term, the policy produces a tax free lump sum for your dependants.
The amount of life cover usually remains level over the plan term
selected, although you can request that benefits increase in line
with inflation as an optional extra.
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Family Income Benefit
These plans
are commonly used for family protection. However, rather than producing
a lump sum should you die during the selected term, the policy produces
a regular tax free income for your dependants for the remainder
of the plan term.
The amount of 'income benefit' usually remains level over the plan
term selected, although you can request that benefits increase in
line with inflation as an optional extra.
A Family Income Benefit policy is usually the cheapest way of providing
benefits for your dependants, although it is also worth considering
a policy which produces a lump sum on death (see 'level term assurance').
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Critical Illness Cover
Critical
Illness insurance will pay you a tax free lump sum on diagnosis
of any one of a wide range of critical illnesses including cancer,
heart attack, stroke, brain tumour and many more.
Criticall illness cover is offered as a basic or comprehensive policy.
The basic plan will cover the main conditions and generally a comprehensive
plan will cover many more which may include loss of sight, permanent
disability, loss of hearing etc. Your quotation will include details
of the cover.
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Critical Illness
Available as an add-on to a life policy. The insurance benefit
will be paid if you are diagnosed as having a critical illness covered
by the plan. If you need both types of cover it is often cheaper
to have a combined plan.
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Guaranteed Premiums
This means the premiums are guaranteed to remain the same for
the duration of the plan, unless you increase the amount of cover
via 'indexation'.
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Indexation
You can arrange for your insurance benefit and premiums to increase
annually in line with inflation or at a fixed percentage.
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Life Cover
With critical illness plans you can also insure against death.
If you need both types of cover it is often cheaper to have a combined
plan.
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Pension Linked
If you are eligible for a personal pension, you may save money
by obtaining tax relief on your life insurance premiums - special
plans allow you to do this.
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Reviewable Premiums
Plans with reviewable premiums are usually cheaper initially,
however, the premiums are reviewed regularly and can increase substantially.
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Terminal Illness
Some life policies include this benefit free of charge and this
means the life insurance benefit will be paid early if you suffer
a terminal illness.
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Trusts
Many insurance companies supply free trust documents when arranging
your policy. Placing your policy in trust usually speeds up payment
of proceeds to your beneficiaries and also may assist with Inheritance
Tax planning.
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Waiver of Premium
A valuable extra which, if you are unable to work through illness
or accident for a number of months, will ensure your cover continues
without you having to pay the policy premium.
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