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What are Life Assurance and Life Cover?

Life Assurance, also sometimes referred to as Life Insurance, is an insurance policy which will pay your family a lump sum payment upon your death.

It is normally used to ensure that in the event of your death, your family can pay off any mortgages or liabilities you may of had, cover funeral expenses, maintain a similar standard of living or simply to leave a sum of money behind after you have died.

As an insurance product, Life Assurance is extremely flexible and can be adapted to suit your exact aims or ensure that you are covering the areas which are important to you.


Why might I need some Life Insurance?

Protect your family with Life Assurance

Generally speaking if you have a mortgage or other liabilities, a partner or children or are wanting to ensure that your funeral can be covered by loved ones if you were to die, you should be considering protecting yourself with Life Assurance.

The exact amount of cover you should be considering and the length of cover will depend on your circumstances and the reasons for taking your cover.

For instance if you were aiming to protect a mortgage, you might consider covering the same sum as the mortgage itself over the same term as the mortgage.


Is Life Cover known under different names?

Because Life Assurance is such a varied and flexible product, it can come under a number of different names. Each generally describes the covers aims however some are simply interchangable with Life Assurance:

  • Life Insurance
    A general term used to mean the same as Life Assurance. The difference is that in the insurance world we insure against something which might happen but we assure against some we known definately will happen at some stage ie death.

  • Mortgage Life Assurance / Mortgage Life Insurance
    Mortgage Life Assurance is used to protect your mortgage against the risk of you dieing and leaving it behind for your family to continue paying. Mortgage Life Assurance is only suitable for mortgages which are Capital and Repayment because the level of cover is designed to reduce as your mortgage reduces over the years.
    The reduction ensures that there is always enough in the 'pot' to pay off the mortgage if the worst happens but there will be very little surplus remaining.

  • Decreasing Life Assurance / Decreasing Life Insurance
    Decreasing Life Assurance is a term used to mean the same as Mortgage Life Assurance. The 'decreasing' refers to the reduction in cover over the years.

  • Term Life Assurance / Term Life Insurance
    Term Life Assurance is the opposite of Mortgage Life Assurance in that the amount of cover remains the same throughout the term of the policy and does not reduce. This type of Life Assurance is suitable for those people with Interest Only mortgages, those wishing to cover funeral expenses and people wanting to leave a sum of money behind to ensure their families standard of living.

  • Level Life Assurance / Level Life Insurance
    Level Life Assurance or Level Term Life Assurance is another term which is used to refer to Term Life Assurance.

  • Increasing Life Assurance / Increasing Life Insurance
    Increasing Life Assurance is an extra option offered by most insurance companies which allows you to protect your Term Life Assurance policy from the effects of inflation. Each year you will be offered the opportunity to increase your amount of cover inline with the retail price index without any further need for medical information.
    This allows your policy to retain its real value over the years so your family receive a payout of equivalent value in years to come.

  • Index Linked Life Assurance / Index Linked Life Insurance
    Another term used to refer to the increasing life assurance option offered on term life assurance policies.


Will Life Assurance cover me if I become ill?

Under normal circumstances you Life Cover will not payout anything to you if you are ill. The policy is only designed to cover you for death and as a result will only pay in this circumstance.


What is Terminal Illness Cover?

Policies do however include something called 'Terminal Illness Cover' which will allow, at the insurance companies discretion, a payout of your policy early if you are diagnosed with a terminal illness where you will die within 12 months.

This is offered as a goodwill gesture by the insurance companies to allow you the opportunity to settle your affairs and make your own arrangements before you die.

It is important to understand that this is not the same as Critical Illness Cover and will only be offered for conditions where your doctor has told you that you will die within 12 months.


Can I get Life and Critical Illness Cover together?

Taking Life and Critical Illness Cover together can provide a great method of ensuring you are fully protected against the eventualities of death and contracting a critical illness such as a heart attack or stroke. It can also serve to reduce Critical Illness premiums compared to taking a Life Assurance and Critical Illness Cover seperately.

For more information on our Critical Illness Covers, please see our Critical Illness Cover guide.


Can I protect my policy against inflation?

Yes! Your policy can include an option called index linking which allows it to increase on an annual basis to offset the effects of the years inflation and increases in the retail price index.

This is important because as time goes by the real time value of your payout will decrease. That is to say that what you can buy for 100,000 today will not be the same in ten years time. Index linking your Life Assurance policy will allow it to maintain that value.


How can I make sure my policy pays out quickly to the person I choose?

At the time of your death your family will obviously be upset and whilst thinking about your insurance payout will probably not be the first thing they want to think about, it may be necessary to cover your funeral expenses or pay off your mortgage. As such it is important that the process for ensuring your family is paid quickly is in place.

Normally your life insurance payout would be paid into your estate and left to the process of probate to decide how it should be divided up and used. Unfortunately probate can be a lengthy process (at times up to 6 months) especially if your will is contested.

One way to avoid the probate procedure for your life assurance is by having your policy written into trust*. Writing your policy into a trust* allows you to nominate to whom the payout should be made, meaning that it is paid by the insurance company much faster to exactly who you intended it to go to.

As an added benefit, writing your Life Cover policy into trust* can also help to limit the effects of inheritance tax on your estate because the payout would no longer form part of the estate.

Having your policy written into trust* can be an expensive procedure if you were to ask a solicitor however Cura Financial Services Ltd is able to have your policy written into trust* for no extra charge to yourself.

* The Financial Conduct Authority does not regulate trusts. The Financial Ombudsman Service is available to sort out individual complaints that clients and financial services businesses aren't able to resolve themselves. To contact the Financial Ombudsman Service please visit www.financial-ombudsman.org.uk.


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