Types of life insurance
Life insurance can be set-up on many different options, and this is were the knowledge and advice of DJB Mortgages advisors can make sure you have the correct policy in place for your circumstances.
Depending on the need for life insurance, will play a huge factor in which type of policy will be best suited to your needs. Below are the different types of methods that life insurance can be structured;
Level cover - This provides a lump sum and will remain the same throughout the term of the policy. This is normally used to protect an 'INTEREST-ONLY MORTGAGE' or a 'FLEXIBLE MORTGAGE' that allows borrow back facilities.
Decreasing cover - This is often chosen to cover a 'REPAYMENT MORTGAGE'. The cover decreases over the policy term, broadly in line with the mortgage.
Increasing cover - This is designed to increase each year to help protect against the future effects of inflation. This type of policy would normally be put in place to protect family requirements rather than a mortgage.
Family income cover - This can provide a family with either monthly or yearly income instead of a lump sum payment.
What is life insurance?
Life insurance can be used for various reasons such as paying your mortgage off on death, or pay your dependents money as a lump sum or as regular payments if you die.
It’s designed to provide you with the reassurance that your dependents will be looked after if you’re no longer there to provide.
The amount of money paid out depends on the level of cover your insure. You decide how it is paid out and whether it will cover specific payments, such as mortgage or rent.
You may need to think about whether receiving a payout will affect any means-tested benefits your dependents might otherwise be eligible for.
Do you need life insurance?
If you have any of the following, life insurance should be on your priority list;
dependants, e.g. school-age children
a partner who relies on your income, or
a family living in a house with a mortgage that you pay – a life insurance policy can provide for them if you die.
You might also want a policy which covers your funeral expenses.
You can’t rely on the government to take care of your family – the money they would get from the state is much lower than you’d probably expect.
If you want to provide for your family financially if you die, think about getting life insurance.
DJB Mortgages can make sure that you have the best advice around your circumstances, and make sure that you have the policy set up correctly.
Should I have the policy in trust?
It’s a sad fact that most people with life assurance in the UK do not have their policies written into trust.
Having your policy in a trust ensures that the benefit is paid out exactly according to the wishes of the deceased. Furthermore, as a policy written in trust falls outside of the legal estate for tax purposes, it is not factored into the calculation of inheritance tax payable and lengthy probate does not need to be granted before the life company can payout. This means that your surviving spouse or children can quickly receive the much needed financial assistance in the event of death.
*For insurance business, we offer advice on products from a choice of insurers.
*Some trusts are not regulated by the Financial Advice Authority.