What is Life Insurance?
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Life
Insurance (with terminal cover included) is a form of insurance that pays out a
lump sum if you die or fall terminally ill during the period covered by the
policy.
Life
Insurance is also some time known as “Term” insurance because the policy only
remains in force for a pre-determined period of time – the “term” of the
policy.
Very
few Companies will offer a policy for less than 5 years and 20/25 years is the
most common period for a policy to be in force. Many Companies will not extend
cover to beyond the age of 65 however some will go past 70.
All
good Life Insurance policies will include Terminal cover free of charge. If a
policyholder were diagnosed with a terminal condition from which a Doctor
expects him, or her, to die within 12 months, the policy would pay out
immediately and not wait for the policyholder to actually die.
You
can have a life insurance policy that covers one or two people (that’s a
“Joint” policy). If it’s a joint policy, most people will elect to the policy
pay out when either of the insured persons dies or becomes terminally ill.
There is another variant however, which only pays out if both policyholders
were to die during the policy’s term. This is commonly known as a second death
benefit life insurance policy.
Another
important point is whether the cover is ‘level’ or ‘decreasing’. With level
cover the sum insured remains constant during the entire period the policy is
in force. With decreasing cover the sum insured, steadily reduces during the
time the policy is in force. Decreasing cover is generally used to support a
repayment mortgage, where the capital outstanding on the mortgage decreases
each month as part of the mortgage repayments repay part of the original sum
borrowed.
A
Life Insurance policy does not have any surrender value. Once the policy comes
to the end of its term, that’s it. The policy is complete and finished and has
no value.
Please
be aware that there are also other variations and optional extras available
within a life insurance contract. You’ll get more information when the adviser
from Torquil Clark phones you.