LIFE ASSURANCE
We all work hard to provide and maintain a life style for ourselves and our loved ones and to plan for any eventualities in life. But if you weren’t here tomorrow, how would your dependents cope financially?
Life assurance provides the peace of mind that, if anything should happen to you, your dependents will be financially secure. It allows you to protect the income of the breadwinner(s) so your dependents can continue with the same standard of living. Life assurance is primarily put in place to ensure that known debts such as a mortgage are repaid in full in the event of the policy holders death.
Assurance Vs Insurance
Life assurance differs from life insurance in that it is viewed as an investment product and, as such, needs to be purchased through a financial advisor, with a full understanding of your personal circumstances. You cannot, therefore, purchase Life Assurance online as you can with Life Insurance.
In the event of death during the policy term, both Life Insurance and Life Assurance would pay out a lump sum. The main difference is that, at the end of the policy term, life insurance has no residual value, whereas life assurance should pay out a sizeable investment sum.
Should you need to make a claim during the policy term, with life insurance the pay-out would be a pre-set amount. A Life assurance policy, on the other hand, pays out a sum equal to the higher of, either a guaranteed minimum underwritten by the policy’s insurance provisions, or its investment valuation. Life assurance policy accumulates annual bonuses which are invested by your insurance company. The value of the investment therefore depends on the insurance company’s investment performance and the length of time you have been paying the premiums. Some policies payment can be triggered by other events such as terminal illness or critical illness.
At the end of the policy term, your life assurance policy is usually awarded a terminal bonus, increasing its residual value significantly.
Whilst life assurance sounds more worthwhile, premiums will be notably higher than for life insurance and investment return on life assurance policies have fallen significantly, affecting their resale value.
‘Whole of Life’ is a specialised form of life assurance. These policies have no pre-set term and remain in force for as long as you live. This type of policy offers advantages for Inheritance Tax Planning.
Consider your requirements
To cover for your mortgage or other borrowing?
Single or joint cover for both you and your partner?
Insurance or investment purposes?
Guaranteed or reviewable premium levels?
Levels of decreasing protection?