Life insurance explained

1. Level Term Insurance - A life insurance plan that pays out a lump sum in the event of your death during a specified term, some plans also pay out should you be diagnosed with a terminal illness.
2. Mortgage Protection - A form of life insurance designed to cover a capital & interest mortgage, in the event of your premature death, where the lump sum payable decreases in line with your reducing mortgage debt.
3. Critical Illness Cover - A critical illness plan provides protection in the event that you suffer a critical illness such as cancer, a heart attack, a stroke, or multiple sclerosis...not a pleasant thought, but at least you'll have the comfort of knowing you can still provide for yourself and your family

You also need to know that the cost of life insurance will depend upon the type of policy, your age, and your health. A life insurance contract is made up of provisions, options, and riders.

1. Provisions describe or explain features, benefits, conditions, or requirements of the contract.
2. Options are features of the agreement that require you to make a choice regarding some aspect of coverage.
3. Riders are additional coverage (or endorsements) offered by the insurer at the time of application and added to the standard agreement in return for an additional premium.

Frequently Asked Questions

1. What is the Difference between Life Assurance and Life Insurance?

Life Assurance - The original product offered by Life Assurers was based on the idea that eventually the product would be enforced. Assurers paid out on event of death, or circumstance leading to death, which resulted in the product being known as 'Whole of Life'. Most companies no longer offer a 'whole of life product' or 'Life Assurance' but tend to offer a number of 'Life Insurance' products. These are more suited to individual requirement and put less risk on the policy provider.

Life Insurance - The development of new products by insurance companies has led to better classification of products, more suited to individual requirement.

'Level term' or 'mortgage protection' are both forms of life insurance and cover a specific period. For example, 'level term' insurance is used to cover a specific period and may be used by a person who has paid off a mortgage but still wants to protect his family in the event of death.

'Mortgage Protection' covers the period of your mortgage; once the mortgage has been repaid your need to protect it becomes obsolete.

Life Insurance does not have to take the form of one policy. For example, a divorcee may have a mortgage protection policy, a level term policy to protect any offspring in the event of death, and may insist as part of any divorce settlement that the former spouse or new partner has suitable protection to cover offspring.

2. Will Smoking Affect my Policy?

Smoking is detrimental to health and is a leading cause of life threatening illnesses. As a result smokers pay higher premiums than non-smokers as the risk of them dying early is greater. Each insurer uses its own methods of weighting the additional premium payable.

An insurer who covers a period of your life will want to protect their investment in you. While the term of your insured period runs, you agree to abide by the terms and conditions of the insurer. If you do not abide by the terms and conditions you will invalidate your protection.

Most importantly, if you smoke and do not declare the fact, you run the risk of invalidating your policy if you have to make a claim.

This can have a huge financial impact on those who depend upon you and are unable to make use of the money that would have been allocated to them in the event of a successful claim.

3. Does my sex or age affect the premium?

It is a known fact that women tend to live longer than men. A female who insures herself using a 'level-term' policy is likely to have lower premiums than a male. This is based on the fact that females live longer and are less likely to claim during the period insured.

However, if she took out critical illness protection it is likely that her premium will be higher than a males, as she is more likely to encounter a critical illness at some stage in the term.

Age is a factor in the successful application for a life policy. Most insurers have an age bracket for the provision of insurers (usually to the age of 75). If you are over 75 it is unlikely you will be able to find cover. If you want cover after the age of 75 it is important to take it out early.

Finally, the older you are the greater the risk to the insurance provider so the higher your premium will be. This starts from the earliest insured age and continues in brackets up to the age the insurer will cover to (75).

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Disclaimer: Tiscali UK is not an insurance intermediary. The information and insurance product(s) found on this page are sourced through Insurancewide.com Services Ltd. Please refer to terms and conditions found at www.insurancewide.co.uk.