Financial products are at their most useful when they are used to protect our families and our incomes in the event of death, sickness or the diagnosis of a critical illness.
Whilst insuring yourself against an undesirable event such as sickness, accident or even death is not a nice thing to think about, the benefit of being able to make financial provision at an emotional time cannot be overlooked.
There are many different ways to look at protecting your family, income and standard of living and there is a large range of products available therefore there is always an appropriate policy to meet your personal circumstances.
There are many different ways in which to look at protecting yourself and your family in the event of an untimely death, diagnosis of a Critical Illness or loss of income through illness:
Level Term Assurance:
Pays a lump sum in the event of death during the policy term. There is no investment content within a term assurance contract so when you get to the end of the policy term there is no maturity payment and the life cover ceases. Any benefit is paid tax free and the monthly contributions are normally fixed for the policy term. Term assurance is a cost effective way of providing protection as the term and benefit are known from outset and there is no investment content to worry about.
Decreasing Term Assurance:
Decreasing Term Assurance works in a similar way to Level Term Assurance but the selected benefit reduces each year over the term of the policy. These policies are ideal to cover repayment mortgages and other debts where the amount of outstanding debt decreases over a period of time. As the benefit reduces over the term the monthly cost for Decreasing Term Assurance is usually less than that of a Level Term Assurance policy.
Critical Illness Policy:
Critical Illness is usually an additional benefit on a term assurance policy although it is available as a standalone benefit as well. Critical Illness will pay a lump sum benefit or Income payment in the event of diagnosis of a pre-defined illness such as Heart Attack, Stroke, Diagnosis of Cancer, Transplant to name just a few. The illnesses covered will be specific to each individual provider and some have more than others.
Family Income Benefit:
This works in the same way as a term assurance policy but actually pays out a regular monthly/annual tax free income instead of paying a lump sum payment. The income payment is payable to the dependents family until the end of the policy term.
Whole of Life Protection:
Whole of life insurance is a policy that guarantees to pay out whenever you die, in contrast to more common term insurance cover. A whole of life insurance policy can be considerably more expensive than a fixed-term policy because the insurer knows that it will have to pay out eventually.
Protection policies often have no cash in value. If premiums are not maintained cover will lapse.
Protection policies do not have a cash value, unless a valid claim is made.