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Life Assurance                                        

So why do I need Life Assurance? - It couldn't happen to me - could it?

Current Age
Chance of dying within the next 12 months
20 to 24
1 in 1,905
25 to 34
1 in 1,449
35 to 44
1 in 794
45 to 54
1 in 312
55 to 64
1 in 127
65 to 74
1 in 45
Source: National Statistics Deaths; Ages & Sex 2002

Some other interesting facts:

  • Every 5 minutes 6 people die.
  • On average each year in the UK 620,000 people die.
  • Almost 1,000 people lose a spouse through death each day.
  • Just under 1 in 5 of male deaths occur between age 20 and 65.
    Source: Financial Services Education for Consumers Limited 1999/03

I am sure I have enough Life Assurance - what amount of cover do I need?
Our simple example below shows the potential life cover requirements of an average 'breadwinner', aged 30, who currently has two young children and who intends to retire at age 55. His / Her typical life cover requirements for the next 25 years could include the following:

Item
Lump Sum Required
Income to be Replaced
Total Lump Sum Required
Mortgage Cover
£100,000
N/a
£100,000
Loans & Credit Cards
£10,000
N/a
£10,000
Salary of £25,000
N/a
£25,000 per annum for 25 years
£625,000
Loss of company car
£15,000
N/a
£15,000
TOTAL LIFE COVER REQUIREMENT
£750,000

Click on our Life Assurance Calculator to work out your exact life assurancer requirements.

I thought Life Assurance was expensive?

Actually the good news is that life insurance premiums have actually fallen in recent years as people are living longer due to the advances in medical science. In fact if you took out life insurance cover more than 3 years ago the chances are that we would be able to find you identical cover for a much lower monthly premium - (why not call us for a quote!)

In the above example this person could effect all the life cover they require to replace their income and provide enough to cover all of their liabilities - giving an equivalent of £750,000 of cover for just £27.03 per month if they are man or just £23.13 for a woman. That is probably less than you spend on either your car insurance or house insurance. (This assumes the person is a non-smokers in good health. This would be achieved by the combination of a Decreasing Term Assurance Policy together with a Family Income Benefit Policy. Premiums correct @ 23/12/2003).

Why choose an Independent Financial Adviser for advice on my Life Assurance Requirements?
With so many companies selling Life Assurance, all with different products, features, costs & charges, finding the right company and type of cover can be quite difficult and time consuming let alone the problem of ensuring you obtain the best value for money. That's where Provident Solutions comes into its own, because we will conduct a detailed review of your circumstances and be able to find exactly the right policy for you and also ensure you get the one of the most competitive premiums available. Call us know on 0116 2592371.

So what is Life Assurance?
In return for a regular monthly premium, a Life Assurance policy can either pay out a regular income or lump sum on the death of the person who takes out the policy. Types of Life cover include:

Level Term Assurance:
This is one of the cheapest forms of life cover because the sum assured is only paid out if death occurs before the expiry date. It pays out a set lump sum for the duration of the policy term. It is 'pure' protection cover with no frills, and as such is suitable for; newly married couples, new parents, people with dependents or anyone else where cost is a factor.
Quite high levels of cover can be obtained for a comparatively small premium. The term of the policy is usually set to your normal retirement date when some form of pension should commence. But if the protection is mainly intended for children or dependents it need only run until the youngest will complete full-time education and/or gain financial independence.

Decreasing Term Assurance
This is a slight variation on the Level Term Assurance detailed above - it is primarily designed to cover outstanding debts and liabilities. As such the lump sum (sum assured) reduces throughout the policy term notionally in line with the reduction of your outstanding debt (such as a mortgage) so as your debt reduces so does the level of cover. The key benefit with this approach is that the premiums are much cheaper than Level Term Assurance because the potential lump sum to be paid out reduces year on year. This type of cover is ideally suited to protect a Capital & Interest Repayment mortgages.

Family Income Benefit
The two Term Assurance policies discussed above would pay a lump sum benefit on death. However, often dependants will require income after the breadwinner's death. This could be provided by investing the lump sum (paid out from a life assurance policy), but then the income would be subject to income tax. There is also the possibility of seeing the capital value of the investment decline as a result of unwise or unfortunate investment, plus the difficulty of the dependant relatives having to actually arrange the investment (of a potentially large sum of money) at a time of bereavement.
A better solution might be a Family Income Benefit policy. On death, this contract pays regular installments of capital for the balance of the term of the policy. Thus, if the life assured under a 25-year Family Income Benefit policy died after ten years, the installments would be payable for 15 years. The installments can be monthly or less frequently. Because they are installments of capital, no income tax is payable. As above policies are usually written to normal retirement date to protect a spouse, or to the expected completion of full-time education in the case of children.

Whole of Life Policies
These policies are more expensive than the three types previously mentioned because cover is permanent - it lasts through life. Unit-linked whole life policies are very popular for family protection. Because these policies are so flexible, they can be adapted to meet changing family circumstances. At outset the policy could be effected on a 'maximum cover' basis with all the premium going towards the life cover. The policy is at that stage effectively akin to a term assurance. Later on, as finances improve, the mix between life cover and investment can be varied as desired. In later life, the policy could be on a 'minimum cover' basis with virtually all the premium going towards the investment into units. Whole of life polices are also used in inheritance tax planning to provide a lump sum to beneficiaries possibly to help them pay death duties (the inheritance tax bill)

Which Life Assurance company is best for you?
This is usually determined by the type of cover that best meets your protection requirements. We will help you choose a company that offers the best value. Term Assurance, for example, is generally sold on price, so it pays to let us 'shop around for you ' to find the cheapest policy. If you're considering a policy with an investment side to it, then it's important to look into the performance ratings of the insurance company. As IFA's we have specialised investment knowledge, and can advise you whether you're interested in a With-Profits or a Unit Linked policy.

How do I find out more?
Call us now on 0116 2592371 and we can arrange to visit you and conduct a thorough analysis of your Life Assurance requirements.

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