What is Decreasing Term/Mortgage Protection Life Insurance?
Whether you are in the process of moving house, or buying for the first time, you'll want to make sure you choose cover that's right for you.
Decreasing Life Insurance is designed to help cover a repayment mortgage or loan over a fixed term, as the lump sum payable on death reduces broadly in line with the balance of the debt outstanding.
Premiums are set at the start of the plan to take this into account, so are often cheaper than level life insurance where the sum assured does not decrease during the duration of the plan. Both level and decreasing life insurance pay out if you die during the plan term but neither has a cash in value at anytime. The cost and level of cover you might need depend on your own personal circumstances
What is Level Life Insurance?
You can't rely on always being there for those who depend on you. That's why it's important to have the right sort of life insurance in place. Level Life Insurance is a straightforward way to provide a financial safety net for your loved ones, or to help cover an interest-only mortgage, by paying out a lump sum to your loved ones if you die during the term of the plan. Bear in mind that there is no cash-in value at any time. The cost and level of cover you might need depends on your own personal circumstances.
A Level Life Insurance plan provides you with an amount of life insurance cover that stays the same throughout the plan. If you die within the plan term, your loved ones will receive a guaranteed cash lump sum, which could be essential in helping them to be financially secure without your income.
Critical Illness Cover
It's easy to think "it won't happen to me", but if the worst should happen, life and critical Illness cover could help provide financial security at an emotional and difficult time. Whether it helps pay off your mortgage, funds a relaxing holiday to recover from treatment, or just help you cope with the bills and expenses, the lump sum pay-out from critical illness cover could relieve worries and let you concentrate on getting better.
How it works
Life and critical Illness cover pays out a lump sum if you either die, or are diagnosed with a critical illness that meets that companies policy definition and then generally survive for at least 14 days.
Cover is available on the critical illnesses which are defined in each company's policy schedule and the extent of the cover and illnesses covered can vary, although the Association of British Insurers (ABI) has set out minimum qualifying criteria to which every company must adhere. Some will therefore have more lenient definitions for any given condition, but each must employ at least the minimum qualifying standard as set down by the ABI. Cover is generally available on over 30 conditions depending on the provider; we recommend you read the full detail of what conditions can be covered, and the restrictions that may apply in their Guide to Critical Illness Cover. This is certainly an area where ‘cheapest isn’t always best’.
Income protection
How would you pay the bills if you were sick or injured and couldn’t work? Income Protection is a policy that helps you cope financially if you can't work due to illness or accidental injury.
- An income you can rely on, if you can’t work due to ill health or accidental injury
- It's affordable and easy-to-arrange, giving peace of mind to you and your family
- Continued benefit when you go back to work in a reduced capacity, with a reduced salary
- Payments will be tax free under current tax rules, although this might change in the future
What can this policy cover?
It pays you a benefit if you can’t work due to ill health or accidental injury, and the benefit starts after an agreed period of time, called a deferred period. Your adviser can see how much you could receive by applying a maximum benefit calculator. Income Protection policies don’t pay any claims made due to redundancy or unemployment. These can however be protected separately.
If you can’t work due to accidental injury or ill health, then an Income Protection Policy will generally replace up to 60% of the first £25,000 of your gross earnings and 50% of the remainder, up to a set maximum. These figures will vary from company to company.
If you’re not sure how much cover you can apply for, ask us to find out.
No matter how many eligible claims you make, these claims will be paid as long as the policy is in place. So if you couldn’t work due to ill health or injury for three separate qualifying periods in a year, for example, generally all three claims would be paid.
How long could the benefit last?
We’ll ask you how long you would like your deferred period to be – that’s the amount of time that must pass between your first day off work, and the point at which you can make a claim on your policy.
The longer the deferred period you choose, the lower your premiums will be. So if your employer provides sick pay for a period of time, or you have a ‘rainy day’ fund, you could use that first. You can generally choose from a minimum of 4, 8, 13, 26, 52, 56, 104 or 112 consecutive weeks.
- Choosing a longer deferred period is a good way to keep your premiums down, but still have the peace of mind there’s an income in place if you’re ill for a long period of time.
Income protection policies are designed to last for as long as you’re in full time employment. Because retirement plans vary, we’ll ask you to tell us at what age you’d like your policy to end. Then, once it’s set up, it will remain in force as long as you keep paying the premiums. The policy has no cash-in value at any time.
Would the Income affect my benefits?
Any income you get from the policy may affect means-tested benefits – but if you’re unsure about what this would mean for you, then we will be happy to answer your questions.
Providing your premiums are paid from taxable income, the benefit we pay will be tax free under current tax rules, although this may change in the future.
