Level Term Insurance
Term Insurance - what is it and what does it do?
Level Term Insurance is the most commonly used form of life insurance, or life cover,
available in the market today. It is available from most Life Assurance companies. The
policy pays a fixed and guaranteed lump sum should the insured person die at any time during
the policy term. The premiums can be either fixed and guaranteed
from outset throughout the life of the policy or reviewable, you choose
which you prefer.
Critical illness cover can be
added to the policy, this would produce a lump sum in the event of
certain serious illnesses being diagnosed. The insured would not
have to die for a claim to be made.
Level Term Life insurance - how it works
If you choose a Level Term Life Insurance policy your
dependants will receive a lump sum
if you die during the period covered by the policy.
The lump sum is tax free and the money from your life insurance
payout can be used for whatever purpose your dependants require.
Premiums can be paid monthly or annually by direct debit from
your bank account.
Why buy life insurance?
When someone dies they leave behind them not only
a grieving family but a dependant family. Just because a person
dies it does not mean everything else stops at the same time. It
is devastating enough for the family to lose a loved one but then to
have to suffer the indignity of not being able to pay the mortgage or
feed and clothe the family properly is beyond comprehension.
How much life insurance cover should I
have?
Your life insurance should be designed to leave your dependants with
the lifestyle you would want them to enjoy. As a general guide, first
calculate your total debts - loans, mortgages, etc. Add to this
figure the amount of capital required to produce the income you want your
dependants to enjoy. As a guide you could assume capital returns
about 4% per annum so for every £4,000 per annum required a lump sum of
£100,000 is needed.
Example.
|
Mortgage outstanding |
£165,000 |
|
Car loan |
£ 14,500 |
|
Credit cards (average) |
£ 4,000 |
|
TOTAL |
£183,500 |
In addition to clearing all debts the family might need an income of
£25,000 per annum. Assuming a return of 4% per annum the
calculation is;
25,000 X 100 = £625,000
4
Total capital required is £625,000 + £183,500 = £808,500
When calculating the income your family will need
you should take your time and remember the multitude of items that are
considered today as normal expenditure. Things like running the
car and replacing it every few years, an annual holiday, the upkeep of
the house - electricity - gas - rates - decorating - repairs -renewing
carpets, furniture, etc. The list can be endless but one thing is
for sure it is not just food and clothing!
This example is only to give you an idea of how to calculate the
amount of life insurance you might need. You should consider your
personal circumstances fully. For example does your employer offer
benefits that should be taken into consideration? The actual
return on money invested will depend on how well the investments
fair over time. An allowance should be made for inflation, it is
likely that dependants will require an increasing income. If you
have a repayment mortgage a
mortgage
protection policy might be suitable to repay it.
The term of the policy also needs to be decided and will need careful
consideration. Do you have children who might attend university
and need a high level of support for some years to come. You might
find that you need to have a higher level of life insurance for the next
X years dropping down to provide a 'widows only' income at the end of
the period. It is possible to set up your cover in this way by
simply taking out one policy to cover the long term requirements and
another shorter term policy to cover the extra requirements of the next
X years.
Consult a financial adviser if you are not confident about your
calculation or decision.
How much does Life Insurance (Term) cost?
The premium will depend on a number of factors, including how
much cover you need and the term of the policy, your age, sex and
your health. Get an
instant quote now and get an idea of your
premium, you will probably be surprised how little it costs.
Why buy
through Moneyworld?
A very simple answer!
You get the same high quality product from the UK's leading Insurance
Companies for less than any other supplier. Please discover this for yourself, get as many
quotes as you like then return to us and save yourself some money.
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