Summary
There are various categories of life insurance quotes policy available in the market. Many clients are now benefiting from cheaper premiums by switching to pension term assurance (PTA) because of the tax relief on the cost of this type of insurnace plan. However it is not suitable for all people.
Recently it was revealed that the cost of life insurance has reduced greatly in recent years. How do you know what kind of policy is most suitable for people like you?
Term policies are the cheapest and simplest typeof life insurance cover - you pay a monthly premium for a set amount of cheap life insurance for a fixed term that the policy will run for. If you were to die during the plans’ term, it then pays out a lump sum. If the policy reaches the end of its term and you have survived, no benefit is paid out.
There are several types of term insurance: “level” term where the payout is a set amount; “decreasing” term, which is often much cheaper because the benefit to be paid out decreases every year. For most clients this type of plan is taken out to insure a mortgage.
Another option is “increasing” term insurance where the cover slightly increases each year during the course of the term ; this can be a good way of protecting your financesagainst inflation.
Joint life policies are benefitial for couples who use both of their incomes to pay the mortgage because a payout is made if either policyholder dies.
Family Income Benefit (FIB) offers the plan holder’s beneficiaries a regular income from the date of death until the policy comes to the end of its term rather than paying out one single lump sum.
How much cover you need will depend on your own individual circumstances. Most large and medium-sized businesses offer a death in service benefit which can pay out 3 or 4 times to your partner if you were to die whilst still employed. Hence if you are reasonably confident about staying a long time with your employer, you may decide that paying for more life cover with another arrangement is wasteful.
The cost of life insurance depends on numerous factors, for example, the length of the policy’s term, the type of policy and certain medical criteria, and certain medical issues - whether you are fat or whether you smoke. Insurance companies are also clamping down on obesity in particular.
There are significant advantages to switching to pension term insurance. If you already have a term insurance policy which pays out a tax free cash sum, you can make big savings on your premiums by switching to a pension term policy. The reason is because under new pension arrangements, most people qualify for tax relief on the money they pay for their life cover if they opt for a pension term assurance (PTA) policy. Pension term assurance is basically the same as standard term insurance in so far as it is still protection-only. So it pays out if you die within the term but if you survive to the end of the policy, the policy is worthless.
However, not everyone will be better off by switching to PTA. For instance, if you bought your life insurance quotes a long time ago, the higher premiums that you may now have to pay because you will then be oldercould well outweigh the benefit of tax relief. Similarly, if your medical record has deteriorated since you purchased your life insurance, you will probably be better off keeping your term insurance.
