Level Term Assurance
With level term assurance you get life cover for a set 'term' and for an amount that is fixed from the start of the term until the end. This guarantees a known lump sum payout upon death within a fixed time. When assessing the cover you may need, you will want to consider the following factors.
The Higher The Cover, The More It Costs
Level term is important protection for those who have children or a spouse or partner who would suffer financial loss if you died, but affordability also counts. If the appropriate cover seems too costly, it is better to have some cover than none.
How Much Cover Do You Need?
The amount of cover should take into account any outstanding debts and allow your dependents to maintain a reasonable standard of living. Check whether your employer provides a death in service benefit, as this may give you a certain amount of cover already and reduce the overall amount you need. Cover may also be needed for a non-working spouse or partner, especially when children are young.
How Long Should Cover Last?
A policy intended to provide for children should last until they finish full time education, or for a partner until the earner reaches pensionable age. Do not feel obliged to cover a round number of years, you can arrange cover for the exact term that is suitable for you. Remember that both level and decreasing life insurance pay out if you die during the plan term but neither have a cash-in value at anytime.
Your Lifestyle Affects The Cost Of Cover
The cost of cover increases with the likelihood of death within the term, so age, health, being a smoker and having a risky occupation can increase the price.
Couples Can Have Joint Or Separate Cover
Couples can choose either separate policies or joint policies that pay out on the first death. However, a joint policy would only be suitable if you needed the policy to pay out on the first death, as the cover would end at that point. Even if a joint policy does look suitable, it is worth getting quotes for separate policies, as they may be cheaper.
Inheritance Tax Planning
If you die the life assurance payment will form part of your estate, which means that the value of your estate could be liable to inheritance tax. In many cases you can avoid this by writing the policy in trust which means the payment goes direct to your dependents, avoiding inheritance tax. Most insurance policies include the option for writing in trust directly, at no extra charge.
For more information about our IFA and financial planning services, simply complete our enquiry form, send us an email or call our Cambridge office on 01223 357131 or our Norwich office on 01603 661156.
