Put simply, life Insurance is a legal contract between the insurance company and the policyholder. The policyholder agrees to pay a set sum at regular intervals to the insurance company. They, in return, agree to pay a set sum of money to stipulated beneficiaries in the event of the policyholder’s death.

There are many different types of policy available and premiums will vary considerably depending on variety of factors.

One important factor in deciding to choose a life cover policy is the state of your health. Smokers are likely to pay around 50% more in premiums as non-smokers of the same age. However, someone who has not smoked for at least a year can then be defined as a non-smoker and the premiums reduce dramatically.

Other factors are also worth considering – the age of the policyholder and even the nature of their employment can drastically alter the size of the premiums available.

Some policies, known as Mortgage Term Assurance policies, are designed to cover the cost of a mortgage in the event of the policyholder’s death. However, these policies do not provide any further income in that event: they are there simply to ensure that that continuing debt is paid off. If you are hoping to use a Mortgage Term Assurance policy, an insurance broker will be able to find a policy that covers your mortgage and pays out a fixed sum to beneficiaries, if that is what you require.

The most common form of life cover is Level Term Assurance in which a fixed sum is paid out. The policyholder takes out this policy as insurance for a fixed number of years – usually until dependants reach school-leaving age or, in the absence of children, when the policyholder’s partner is old enough to receive a pension.

Some life cover policies offer critical illness clauses in which a pay out is awarded in the event of a specific illness or injury. However, these clauses are very specific as to which illnesses or injuries they are insurance for and policyholders can come away feeling short-changed as a result. It pays to check the extent of your coverage and it what circumstances pay outs will be made – many illnesses that were once covered as standard are now no longer included in some policies as they are no longer classified as life-threatening (ie the recovery rate is far more favourable). In many cases Critical Illness Cover is available as an add on to your Life Insurance policy for an extra cost and is often classified as distinct from Terminal Illness Cover which is often (life assurance from Legal and General for example) included at no extra cost.

There are also joint policies available to couples, which can reduce the cost of repayment premiums. These are designed to pay out a fixed sum in the event of the first death in the relationship, but they tend to work on the assumption that each party earns a similar wage.

A basic rule of thumb is to remember that the shorter the period of time you are insured for, the less the repayments will be – and that the fewer risks involved in your lifestyle, including things such as smoking and general health, the more likely you are to find an affordable life insurance policy.

As with any type of insurance policy it pays to ask your insurance provider if there are any measures you can take to reduce your premium – regular health checks and lifestyle changes may affect your premium positively.

As with any form of insurance it’s a good idea to shop around for the best deal. These days however a number of big insurance providers will effectively search the market for you – Asda Finance for instance source their life insurance products from a wide range of insurers so that when you get your quote you know it’s the best deal from a diverse pool of policies.

This entry was posted on Tuesday, July 1st, 2008 at 8:55 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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