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Life Insurance pays out a lump sum if you
die whilst the policy is in force.
Life Insurance is also known as “Term”
Insurance because a policy only remains in force for a
pre-determined period of time – its’ “term”.
Few Life Insurance Companies will offer you a policy for
less than 7 years and 20/25 years is the most common term.
Most Companies will not offer you insurance over the age of
65 but a few will go to 70.
All quality Life Insurance policies will include Terminal
Illness cover free of charge. Terminal Illness cover is
a provision whereby, if a policyholder were diagnosed with
an illness from which a Doctor expected him, or her, to die
within 12 months of diagnosis, the policy would pay out
immediately. The payout would not wait for policyholder
to pass away.
Life Insurance policies can be for one or two people (that’s
a “joint” policy). If it is a joint policy, most
people elect for the policy to pay out if either of the policyholders
were to die or become terminally ill. There is another, less
popular version, version which only pays out if both
people were to die during the policy’s term.
Two other points you may wish to be aware of relate to “level”
or “decreasing”
cover. With level cover sum paid out remains constant during
the policy’s term. Decreasing cover is where the sum
of the policy would pay out, steadily reduces during the policy’s
term. This is used, for example, to insure a repayment
mortgage, where the sum outstanding to the mortgage provider
decreases as part of your monthly mortgage repayments repay
the original sum borrowed.
A Life Insurance policy has no investment value. When the
policy completes its term, that’s it. The policy is
finished and has no outstanding value.
You should be aware that there are other variations of life
insurance contract and optional extras are available.
The following Frequently Asked Question is related to the
above topic. You may care to read them: -
What is the difference
between a Reviewable and a Guaranteed policy?
What are the most common optional
extras available on life insurance policies?
What does Mortgage
Payment Protection Insurance do?
What is the difference
between Terminal Illness cover and Critical Illness Insurance?
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