Life Insurance Explained
Life Insurance is a contract between the policy owner and an insurance company, where, upon the policy owners death or other event such as terminal illness or critical illness, the insurer agrees to pay a sum of money to the policy owners family. This money can then be used to pay funeral expenses, clear any outstanding debts and provide for a family. In return, the policy owner agrees to pay a stipulated amount called a premium at regular intervals or in lump sums.
This can prove invaluable for the policy owners' peace of mind and for those who will be left behind and is why Life Insurance cover is increasingly being seen as essential in the modern world.
There are several factors that can help reduce a Life Insurance premium. Being a non smoker is a major factor, as smokers can expect to pay a higher premium than non smokers. Being fit and healthy, taking regular health checks, can also reduce a Life Insurance premium. While Life Insurance may seem unimportant at a young age the premiums for a Life Insurance policy taken out at a young age can be considerably lower than those taken out at an older age.
Level Term Insurance
Level term insurance is an insurance policy which provides cover at a fixed rate of payments over a specified period of time.
In the event of the death of the policyholder during the period in which the policy runs the policy will pay out a lump sum to the beneficiary.
When selecting a level term insurance policy, you choose the sum insured (the amount to be paid out) and the policy term (the duration of cover).
The sum insured is guaranteed at the outset and remains unchanged throughout the term of the insurance policy
Level term insurance is often the most inexpensive way to purchase a substantial death benefit on a cover amount per premium pound basis.
Decreasing Term Insurance
Decreasing term insurance is an insurance policy which provides cover for a set term and pays out a lump sum if the policyholder dies during the the term of the policy.
With a decreasing term life insurance policy, the amount of the death benefit decreases each year of the fixed term -- such as 20 years -- although the premium remains the same.
This type of insurance tends to be an economical way to protect beneficiaries should the policyholder die unexpectedly during a period when they have substantial financial responsibilities. The decreasing term insurance should be carefully matched to the loan or mortgage that it is designed to pay for. It should decrease in potential payout at the same rate that the mortgage is reducing.
Critical Illness
Critical Illness cover is a long term insurance policy, where the insurer is contracted to make a lump sum payout if the policyholder is diagnosed with certain life-threatening or debilitating conditions such as stroke, multiple sclerosis, heart attack, kidney failure and certain types of cancer.
The illnesses covered will be specified in the policy, as will any exceptions and limitations, and can vary between different insurers.
This policy helps a policy holder in meeting medical expenses. It also protects a mortgage and comes in handy when a person is devoid of income due to illness. This sum is paid directly to the insured regardless of any other sources of income (job-related and non-job-related), expenses incurred (medical and nonmedical), and any other factors.
