Premiums can be paid monthly or, if you prefer,
premiums can be paid annually in advance. These payments continue
for the term of the policy.
What is Critical Illness Insurance?
Critical Illness (also known as Serious Illness Insurance)
provides the policyholder with a guaranteed lump sum in the
event of them being diagnosed with a serious illness. Critical
Illness policies can be taken out separately from Life Insurance
or can be combined.
You can take out the plan on your own or with someone else.
For joint policies the cash sum is normally payable only once,
on the first claim.
What should I consider when selecting a Life Insurance
policy?
There are three main considerations:
1. The sum insured
Calculate how much money would be needed in the event of your
death to pay off all your debts plus how much income your dependents
would require to continue the same lifestyle they currently
enjoy. (Don't forget to allow for inflation in all this)
Or, for a more generalised guide then, consider insuring your
life for between 5 and 10 times your current net salary after
tax.
If you are using life insurance to cover the repayment of a
mortgage (sometimes known as Mortgage Protection Insurance),
the initial sum insured must equal the value currently outstanding
on your mortgage.
With Family Income Assurance or Benefit you are insuring that,
in the event of your death, your family will be provided with
a regular income, as opposed to a lump sum. You will need to
calculate how much income your family will need to live a comfortable
life. If you have made arrangements to pay off the mortgage,
you can ignore the cost of paying the mortgage. You should also
take into account any lump sums that will be provided by any
other insurances, pensions or investments you have.
2. The Policy Term
Once you have decided on the value of cover you need, the next
step is to decide how long you wish to be covered by the insurance.
For Mortgage Protection, the Term needs to equal the number
of years outstanding on your mortgage.
In other circumstances, the Term is a personal decision but
your age should be an important influence. You should note that
the minimum Term is usually 5 years and most people select a
Term between 10 and 25 years.
3. Do you want the sum insured to be increased automatically
in line with inflation ie an "indexed" policy?
Indexation is an optional extra and your monthly premiums
will increase each year in line with the adjustment made by
your Insurance Company.
Life policies that provide an increasing sum insured are called
'Increasing Term Insurance'; policies that provide a constant
sum insured are known as 'Level Term Insurance'.
Finally, you should always read the Key Features Document for
a Life Insurance policy to ensure you understand exactly what
you will be insured for and any restrictions that may apply.
(eg a common restriction is death caused by being involved in
a hazardous pursuit.)
Can the policy cover my partner and myself?
Yes! These policies are known as 'Joint Life Policies' and
there are two types - policies that immediately pay out if EITHER
of you were to die whilst insured, ('Joint Life First Death
Policies'); and, policies which pay out only if BOTH of you
were to die during the period covered by the policy ('Joint
Life Second Death Policies'). This means that both people named
on the policy must have died whilst the policy is in force (but
not necessarily at the same time) for the sum insured to be
paid out.
You should note that if the second person named on the policy
is not your spouse then you will have to prove insurable interest
(ie that their death has a financial impact on you).
What happens if I stop paying the monthly premiums?
Your policy will lapse, meaning you are no longer insured. The
length of time between the last payment and when the policy
lapses, will vary between life insurance companies.
The life insurance company will write to you to tell you that
a payment, or several payments, have been missed and that your
policy will lapse. The insurance company will always give you
time to correct a missed payment.
