Life Insurance Cover

Life insurance is a type of life insurance policy that runs for a set period of time. As long as you pay your monthly premium, a lump sum will be paid out to your dependents should you pass away during the term.

This type of life cover is different to Life Assurance because providers of this type of policy are expected to pay out at some point, so it tends to be more expensive than standard Life Insurance.

Before choosing a life insurance policy, the potential policyholder needs to calculate how much of a lump sum they want to leave once they have died.

A monthly premium can then be calculated depending on what you want this figure to be.

Certain policies allow you to review this if your circumstances change. Other types of life insurance policies let your insurer invest your monthly premiums to increase your final payout.

Life insurance covers you in the event of your passing during a set term.

So, if you die outside of this period, there won’t be a pay out, even if you’ve been paying the premium for some time. These plans are generally used to protect a mortgage. Life insurance covers you for the whole of your life.

Life insurance is not seen as a taxable benefit by HMRC. Many people take out this kind of cover to help their families avoid paying inheritance tax. Any assets you had are passed on after your death.

If they add up to more than £325,000 then the remainder is taxed at 40%. As any inheritance cannot be shared until the tax has been paid, it means a family often has to borrow money to pay this bill. Taking out a life insurance policy is a potential way around this.

Although many assume life assurance and life insurance are the same things, there are differences between the two. Life assurance has no fixed end, so will pay out a sum of money in the event of your death, no matter when this might be.

Life insurance only covers you for a certain period of time. If you pass away during this period your family will receive a sum of money. However, if you survive the term, the policy will end without any pay out. So, with the support of an adviser, you can make sure you secure the policy that's right for you.