Life Assurance
Introduction
As most people know, life assurance is used to provide a cash sum on the death of an individual. This provides useful financial assistance for family or dependants. Apart from this type of cover, other types of protection can also be included, for example against a critical illness or disability. These protections are very often also combined with a savings option in the same policy.
For those policies which offer a combination of benefits, the premium paid by the policyholder is used proportionately to pay for the protection benefits and to provide cash for investment. The exact percentage of the premium used for each purpose will depend entirely on the policy selected.
The large range of choices available in the life assurance market means that policies can now be used for many different purposes as well as the traditional one, for example, savings for retirement or school fees.
Term Life
A 'Term Life' policy pays a lump sum only upon the insured's death and does not provide dividends. Term policies are of a fixed duration, for example 10 or 20 years. If no claim is made, the policy will cease after this time.
The benefits provided by a term life policy usually remain constant throughout the duration of the policy. However, they can be specially adapted, for example, in connection with a mortgage. In this case the protection benefits will gradually decrease as the amount of the loan decreases.
Whole Life
The 'Whole Life' policy can provide a cash value for the policyholder during his lifetime, or provide a lump sum plus dividends to the beneficiary upon insured's death. Premiums are usually paid to the insurer at regular intervals, and are then invested by the insurer to generate dividends for the policy, hence performing savings as well as protection functions.
Endowment
An 'Endowment' policy pays out a lump sum upon reaching an agreed date, thus providing a savings function for the policyholder. It also pays a death benefit should the insured die before the agreed date is reached, so providing a protection function as well.
A Choice of Savings Type
Policies of which part of the premium is used for investment purposes fall into two groups; those offering guaranteed returns and those offering returns which directly reflect the performance of the stock market. Policyholders must choose carefully which kind of policy they believe is best suited to their needs.
Dread Disease
These policies offer a lump sum in the event that the person insured contracts a critical illness, such as cancer or heart disease. Most dread disease policies also provide benefits in the event of death, thus providing a payment in lieu of a critical illness for which a policyholder has not previously claimed. It is quite common for these kinds of policies to be added to whole life or endowment plans in the form of a rider.
Income Replacement Plans
These offer a percentage amount of the insured's salary to replace his income if he is ill and cannot work for a prolonged period of time. This is paid regardless of whether he is in hospital or not.
Also offered are hospital income plans. These offer a fixed cash sum for each day spent in hospital, so helping to meet all the usual household bills which still need to be paid.
Disablement Policies
These offer a lump sum in the event that the insured is permanently disabled due to an accident. These are normally attached to whole life or endowment plans.
Introduction
As most people know, life assurance is used to provide a cash sum on the death of an individual. This provides useful financial assistance for family or dependants. Apart from this type of cover, other types of protection can also be included, for example against a critical illness or disability. These protections are very often also combined with a savings option in the same policy.
For those policies which offer a combination of benefits, the premium paid by the policyholder is used proportionately to pay for the protection benefits and to provide cash for investment. The exact percentage of the premium used for each purpose will depend entirely on the policy selected.
The large range of choices available in the life assurance market means that policies can now be used for many different purposes as well as the traditional one, for example, savings for retirement or school fees.
Term Life
A 'Term Life' policy pays a lump sum only upon the insured's death and does not provide dividends. Term policies are of a fixed duration, for example 10 or 20 years. If no claim is made, the policy will cease after this time.
The benefits provided by a term life policy usually remain constant throughout the duration of the policy. However, they can be specially adapted, for example, in connection with a mortgage. In this case the protection benefits will gradually decrease as the amount of the loan decreases.
Whole Life
The 'Whole Life' policy can provide a cash value for the policyholder during his lifetime, or provide a lump sum plus dividends to the beneficiary upon insured's death. Premiums are usually paid to the insurer at regular intervals, and are then invested by the insurer to generate dividends for the policy, hence performing savings as well as protection functions.
Endowment
An 'Endowment' policy pays out a lump sum upon reaching an agreed date, thus providing a savings function for the policyholder. It also pays a death benefit should the insured die before the agreed date is reached, so providing a protection function as well.
A Choice of Savings Type
Policies of which part of the premium is used for investment purposes fall into two groups; those offering guaranteed returns and those offering returns which directly reflect the performance of the stock market. Policyholders must choose carefully which kind of policy they believe is best suited to their needs.
Dread Disease
These policies offer a lump sum in the event that the person insured contracts a critical illness, such as cancer or heart disease. Most dread disease policies also provide benefits in the event of death, thus providing a payment in lieu of a critical illness for which a policyholder has not previously claimed. It is quite common for these kinds of policies to be added to whole life or endowment plans in the form of a rider.
Income Replacement Plans
These offer a percentage amount of the insured's salary to replace his income if he is ill and cannot work for a prolonged period of time. This is paid regardless of whether he is in hospital or not.
Also offered are hospital income plans. These offer a fixed cash sum for each day spent in hospital, so helping to meet all the usual household bills which still need to be paid.
Disablement Policies
These offer a lump sum in the event that the insured is permanently disabled due to an accident. These are normally attached to whole life or endowment plans.
Introduction
As most people know, life assurance is used to provide a cash sum on the death of an individual. This provides useful financial assistance for family or dependants. Apart from this type of cover, other types of protection can also be included, for example against a critical illness or disability. These protections are very often also combined with a savings option in the same policy.
For those policies which offer a combination of benefits, the premium paid by the policyholder is used proportionately to pay for the protection benefits and to provide cash for investment. The exact percentage of the premium used for each purpose will depend entirely on the policy selected.
The large range of choices available in the life assurance market means that policies can now be used for many different purposes as well as the traditional one, for example, savings for retirement or school fees.
Term Life
A 'Term Life' policy pays a lump sum only upon the insured's death and does not provide dividends. Term policies are of a fixed duration, for example 10 or 20 years. If no claim is made, the policy will cease after this time.
The benefits provided by a term life policy usually remain constant throughout the duration of the policy. However, they can be specially adapted, for example, in connection with a mortgage. In this case the protection benefits will gradually decrease as the amount of the loan decreases.
Whole Life
The 'Whole Life' policy can provide a cash value for the policyholder during his lifetime, or provide a lump sum plus dividends to the beneficiary upon insured's death. Premiums are usually paid to the insurer at regular intervals, and are then invested by the insurer to generate dividends for the policy, hence performing savings as well as protection functions.
Endowment
An 'Endowment' policy pays out a lump sum upon reaching an agreed date, thus providing a savings function for the policyholder. It also pays a death benefit should the insured die before the agreed date is reached, so providing a protection function as well.
A Choice of Savings Type
Policies of which part of the premium is used for investment purposes fall into two groups; those offering guaranteed returns and those offering returns which directly reflect the performance of the stock market. Policyholders must choose carefully which kind of policy they believe is best suited to their needs.
Dread Disease
These policies offer a lump sum in the event that the person insured contracts a critical illness, such as cancer or heart disease. Most dread disease policies also provide benefits in the event of death, thus providing a payment in lieu of a critical illness for which a policyholder has not previously claimed. It is quite common for these kinds of policies to be added to whole life or endowment plans in the form of a rider.
Income Replacement Plans
These offer a percentage amount of the insured's salary to replace his income if he is ill and cannot work for a prolonged period of time. This is paid regardless of whether he is in hospital or not.
Also offered are hospital income plans. These offer a fixed cash sum for each day spent in hospital, so helping to meet all the usual household bills which still need to be paid.
Disablement Policies
These offer a lump sum in the event that the insured is permanently disabled due to an accident. These are normally attached to whole life or endowment plans.