There are several types of life insurance cover. Find out more so you can choose the most appropriate plan for you.
Whilst they are many different types of life insurance contract they all fall into one of two categories:
Those which have an element of investment in the plan, which can return a value even if no claim is made on the plan. These include whole of life contracts and endowment policies.
Those which have no investment return at any time, and only pay out if an insured event (death, critical illness, sickness or unemployment) happens during the term of the plan. These are known as term plans, and are the most commonly used plans.
As you might glean from the name, these insurance contracts cover you for the whole of your life regardless of how long that might be. Whilst they are always more expensive than term plans they offer considerable benefits. The most obvious is that they will provide cover when most insurers would refuse to offer terms based on age. They are costed from the earliest date you commence the policy and you pay for the rest of your life based on that age and your health at that time. They are often used for estate planning by writing the benefits of the policy into trust for future generations. As a part of the premium will be invested from outset it is crucial that you have confidence in the investment management of these plans.
Term insurance plans offer to cover specific events during a specified period of time. Almost all contracts which cover the payment of income or capital as a result of ill health tend to be term plans. There is no return on the premiums paid if a claim is not made. As the insurer faces far less risk than in a whole of life contract, the premiums are significantly cheaper.
Most insurance plans, whether whole of life or term, offer a range of add-on benefits, such as the option of the company to pay the premium if you are unwell or the option to pay the mortgage for a set period if you are made redundant. Think carefully about which benefits you do add on as they all increase the premium.
Thankfully, the worst of the insurance policies which were aggressively sold to borrowers (PPI insurance) are no longer usually offered. These plans, whilst relatively inexpensive, were notoriously difficult to make a significant claim on.
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