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Life Assurance Direct

Q.What is Life Assurance?

Life assurance is sometimes referred to as life insurance or term life. They basically mean the same thing, in that they take care of your dependents’ financial needs in the event of your untimely death.

The insurance company charges you premiums, normally paid monthly; in return they pay your family a lump sum if you die. This is normally tax free.

The cost depends on several things, such as your age, your gender, and your present state of health and whether you smoke or have smoked in the last year.

Q.Do I Need Life Insurance?

If you have a family who depend on your income for their support or have a mortgage, then the answer is most definitely “yes”. Consider for a moment what would happen if you were to die.

  • Would your family be able to cope financially?
  • You have built your family a standard of living based on your income. Imagine what would happen if that income were to disappear.
  • Could they stay in the same house? Would the children be able to attend the same school and have the same friends and go on the same holidays?

Money alone does not replace you, but it can replace your ability to take care of your loved ones and give you peace of mind.

Q.How Much Life Insurance Do I Need?

Every individual’s needs are different but as a ‘rule of thumb’, multiply your net income after tax by 20.

For example, if you earn £35,000 after tax, multiply by 20 = £700,000. This is on the basis that £700,000 invested at 5% will bring in £35,000 per annum.

This, of course, is only a rough guide and you should take into consideration any “Death in Service” benefits and pension benefits that your partner may receive. You might also allow for the fact that your mortgage would be paid off by your mortgage protection insurance.

Q.For How Long Do I Need to Take Out the Insurance?

The idea is to protect your family while you are earning an income and that usually is until you retire.

In the case of your mortgage, it would be until the mortgage debt is paid off.

Please note:

  • If you have a ‘repayment’ mortgage, this is normally covered by Decreasing Term Assurance
  • If your mortgage is on an ‘interest only’ basis, you should consider Level Term insurance

Q.What is the Difference Between Reviewable Premiums and Guaranteed Premiums?

The Insurance Company at certain anniversaries depending on their claims record can increase reviewable premiums. These anniversaries can be every 5 or 10 years depending on the policy.

Guaranteed premiums do exactly what they say. The premiums are guaranteed to stay the same until the end of the policy.

Q.What is Waiver of Premium?

This is an option that pays the premium on your policy if you cannot work due to an accident or an illness, normally once you have been incapacitated for a minimum of 6 months.

The insurance company will waive (forgo) the premium until you are fit to return to work. This should not be confused with unemployment insurance.

Q.Terminal Illness

Terminal Illness insurance should not be confused with Critical Illness insurance.

Terminal Illness is usually added to most policies free of charge. If your doctor and the insurance company agree that you are terminally ill and will not survive a further 12 months then they will generally pay out the sum assured. This gives you the opportunity to sit down with your advisers, i.e. your solicitor and your financial adviser, to update your will and see that the money is wisely invested for your family. This may strike some people as somewhat morbid but it makes sense that you have the opportunity to put your house in financial order.

Q.What is Critical Illness?

A Critical Illness insurance policy pays out a tax free lump sum of money upon diagnosis of a specified critical illness. It is generally more expensive than life cover; however you are far more likely to suffer a critical illness than to die.

Many companies also offer free children's critical illness cover in their policies. This means that a number of your children or potential children are also covered under your policy. Any claims made on the children's cover are not subtracted from your cover, so your cover does not need to stop.

Critical Illness Insurance is an important part of your overall protection portfolio. We recommend that you take out the same amount of cover as your life assurance, however it can be quite expensive and it is really down to individual financial circumstances.

Q.Is There a DIfference Between Critical Illness and Income Protection?

Critical Illness Insurance provides a tax free lump sum of money upon diagnosis of a specified critical illness. This is not related to your occupation and by default does not provide cover should you be unable to work. For example, somebody may suffer from a heart attack or become blind/deaf. While this would more than likely have a huge impact on their life, it may not stop them from working, so in this instance a Critical Illness Policy would pay out.

Income Protection Cover provides a tax free monthly benefit, normally up to 60% of your gross earnings. This can be index linked and may run until your retirement age. This may be means tested depending on your own situation, and is not confined to any specific illnesses. It will pay out once you have been off work for a set amount of time and you can normally choose between deferred periods of 1,2,4,8, weeks and so on. The longer you defer the claim period, the cheaper the premium will be.

To have the most comprehensive cover, we recommend that people consider having Life Insurance, Critical Illness Insurance and Income Protection Cover.

Some companies may exclude conditions from a policy if you have a pre-existing medical condition; for example, it is unlikely that a company would cover you for cancer if you have had cancer before. We advise that you check your key features, policy documents and terms to find out more details about any exclusion that may apply.

A full list of illnesses covered by each company can be found in the Key Facts when you request a quote.

Q.How Can I Be Sure I am Getting the Best Premiums?

Because at Life Assurance Direct, we believe in offering you the facility to quote and compare the whole of market for yourself. This allows us to offer you the best valued premiums, we believe, on the UK insurance market.

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Do you know what it takes to protect you, your family, home and income? Unsure about what type of life insurance to buy, or how much disability income insurance you need? With any question, send us an email. We’re here to help!