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Life Insurance (assurance) Guide

Life Insurance Guide

Life Insurance, sometimes known as life assurance, is designed to cover the unthinkable. It is unpleasant to consider what might happen to your family in the event of your untimely passing; but it may be more unpleasant still to imagine them struggling financially without the support that you provide.

 

Term life insurance will pay out a given sum should the policyholder die within the period specified. If the policyholder out-lives the policy, or fails to continue payment of the premium, the policy will cease and there will be no ‘cash in value.’ Many people take out life cover to gain reassurance that their financial commitments, such as a mortgage, will be met in the event of their death.

 

The amount of money that the policy will pay out in the event of a claim is known as the 'sum assured'. There are generally no limits to the sum assured amount on a life assurance policy, and you can choose to have cover from age 17 to age 89

 

Requirements

 

The initial details required before a term life insurance quote can be provided by the insurers are:

 

•  Age
•  Sex
•  Do you smoke?
•  Body Mass Index (BMI)
•  Occupation
•  Term of policy
•  Sum Assured Amount
•  Type of Cover (level, increasing or decreasing)

 

In addition, the term life insurance premium eventually quoted by the insurer will take into account the family history, hobbies and pastimes, medical disclosures and travel habits of the client.

 

Types of Life Insurance

 

Decreasing term life insurance: the sum assured decreases during the policy term, but the premiums remain level. This type of life insurance may be suitable for covering a repayment mortgage. Decreasing term premiums are lower than their level term equivalents as the sum assured decreases over time.

 

Level term life insurance: the sum assured remains unchanged during the policy term. This may be suitable for those wishing to cover the risk associated with an interest-only mortgage.

 

Increasing term life insurance: because of inflation, the actual value of money will decrease over time – consider what might have been attainable with £1000 in 1990, for example, and what the same sum might buy today. To counter-act this, with increasing term assurance, the sum assured can increase by linking to rate of inflation indicators such as the RPI or by a pre-defined interest rate. Premiums will also increase annually. If the client decides that they do not want to accept the increased premium at any point, they can fix the sum assured (and premiums) at their current value - the policy will then become level term life insurance.

 

Single or Joint Life Cover?

 

Any of the types of cover above can be taken on either a single or joint basis.

 

On single life cover, the cover will stop once the insurer has paid out one claim.

 

On joint life policies you may have the choice of a joint life first death, which pays out on death of first policyholder then stops, or joint life last survivor which pays out on the death of the second policyholder.

 

Life Insurance Underwriting

 

Most applicants for life insurance through Usay will get an immediate decision on their cover over the telephone. However, if an immediate underwriting decision is not available, the insurer may use any or all of the following options before deciding whether or not to progress the application:

 

- An underwriting representative of the insurer may wish to speak directly with the applicant to clarify any disclosed conditions further, or to financially underwrite large sums assured. In around 13% of cases, a GP’s report may be requested by the insurer before an underwriting decision is made.

 

- A medical examination may be required – this is also known as 'paramedical underwriting'. Tests may include a cotinine test, to determine whether the client has recently used tobacco products; or a full blood profile (FBP) test to measure blood cells and tissue.