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by:
Claire Bowes
Life insurance
in the UK is becoming more and more popular with many people now realizing the
importance and the benefits of a good life insurance policy. There are two main
types of popular life insurance, both of which offer a range of invaluable benefits
to UK consumers. Level
Term Life Insurance Level
term life insurance is the most popular type of life insurance policy with UK
consumers, and this may be because it is also the cheapest form of insurance.
With level term insurance, you and your family can enjoy peace of mind at an affordable
price. If you die during the term of this insurance policy, your family will receive
a lump sum payment, which can help to cover a number of costs as well as provide
some degree of financial security at what will inevitably be a difficult time.
The money could assist with costs such as: One
of the reasons that level term life insurance is a fair bit cheaper than other
life insurance is because the insurer only has to make a payment if the insured
party passes away, and even then the insured party has to die during the term
of the policy for the next of kin (or the named beneficiary) to be eligible for
a payout. One of the great things about levels term insurance is that you can
benefit from cover for just a few pounds each week, and because the payments remain
the same throughout the term of the policy, you’ll never have to worry about rising
payments. The
reason why a level term insurance policy is so called is because the repayment
remain level throughout the term of the policy, so you will never have to worry
about the cost of your policy rising. The policy is also taken over a fixed term,
which is where the ‘term’ part of the policy comes in. This means that you can
enjoy easy budgeting and low cost repayments, and you’ll know exactly how long
you will be making payment for. On the downside, once the policy expires you will
not be able to reclaim any money and the policy will be cancelled, so you will
then need to look at taking out alternative life insurance cover.
The average
term of a level term life insurance policy – unless otherwise specified – is fifteen
years. There are a variety of factors that contribute to the cost of the policy
such as whether you go for the most basic package or whether you include a bolt-on
such as critical illness cover, whether you are a smoker, your general health,
and the term over which you take the policy out. Whole
Life Insurance Unlike
level term life insurance, whole life cover offers a guaranteed payout, which
to many people makes it better value for money in the long run. Although the repayments
on this type of cover are more expensive than level term insurance, the insurer
will make pay out whenever the insured party passes away, so the higher monthly
payments will guarantee a payout at some point. There
are a number of different types of whole life insurance policies, and consumers
can select the one that best fits their needs and their budget. As with other
insurance policies, you can tailor-make your whole life insurance cover to include
additional cover such as critical illness insurance. The variations on whole life
insurance cover include: Non-profit
UK whole life insurance policies: This is the simplest form of whole life cover,
and enables you to enjoy the convenience of level payments through the term of
the policy until you die. Upon death, your family received a payout and the policy
becomes null and void. If you want to pay a little extra, you can take out a policy
that is fixed over a specified term, which means that you will only be making
payments for a certain amount of time, but your family will still receive a payout
when you die. With-profit
UK whole life insurance: This is a cover and investment type scheme, where your
monthly payments are split between your cover premiums and the investment side
of your policy. You will enjoy a guaranteed assured sum, and you may find that
your insurer adds discretionary bonuses. Low
cost UK whole life insurance: One of the cheapest forms of whole life cover, this
type of policy features a decreasing term plan, and the policy is combined with
a profits fund. As bonuses are added to the profit side of the policy, the policy
term decreases. This provides a cost effective solution for those that want to
enjoy the benefits of whole life insurance cover without having to make high monthly
payments. Unitised
UK whole life insurance policy: When you purchase this type of whole life cover,
you will also be investing in with-profit units. This means that when the insurer
makes a payout, the sum awarded will be dependant upon the value of the units
in comparison to the value of the death benefit (the payout will be based upon
whichever is the highest in value). Each month units are cancelled in order to
increase levels of death benefit cover, with reviews carried out from time to
time to ensure adequate levels of death benefit cover.
Summary
Both
level term insurance policies and whole life policies offer valuable peace of
mind to policyholders. The cost of this type of life cover is a small price to
pay for the peace of mind that comes with being protected, and you can increase
this peace of mind by adding extras such as critical illness to your policy for
just a small extra fee. As
a nation, we like to insure just about everything we can…our cars, our homes,
our belongings, our pets, and even our credit repayments. It therefore makes sense
that we should insure the most important thing of all – our lives.
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