Life Insurance Jargon

 

> Level Term

> Decreasing Term

> Waiver of Premium

> Reviewable Premiums

> Guaranteed Premiums

> Increasing Cover  

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Level term Life Insurance:

Level Term life insurance is ideally suited for people who wish to have the same amount of cover at the end of the policy as they did at the beginning.

For example, £100,000 of ‘level’ cover for 25 years will always provide £100,000 of cover during the 25 year term.

This type of cover is recommended for Interest Only Mortgages because the amount borrowed will stay the same throughout the mortgage (unless mortgage overpayments are made).

Using ‘level’ cover for a repayment mortgage will mean a surplus of cover is generated over time as the mortgage goes down. This can therefore provide extra cover for your family.

Level cover is the most reommended type of cover and is the preferred choice of many.

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Decreasing Term Life Insurance:

Dercreasing term life insurance does what you would expect. It decreases over time.

This type of cover is cheaper than ‘level’ cover and should meet the requirements of a ‘repayment’ mortgage.

The rate at which the insurance decreases is set at the start of the policy but mortgage rates could go up and so the insurance could decrease quicker than the mortgage.

There are however a few insurance companies who will guarantee there will always be enough cover to repay the mortgage.

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Waiver of Premium:

Waiver of premium is an extra benefit that protects your monthly payments if you are unable to work due to serious illness or disability.

For example, if you are seriously injured in a car accident and unable to return to work this benefit will mean the insurance company will ‘waive’ the monthly premiums so you don’t have to continue payng for your insurance but the policy will stay in place.

There is a cost associated with Waiver of Premium but it is minimal and well worth it.

Imagine being seriously ill or disabled and as a consequence also having to give up your life insurance policy. This benefit means you don’t have to.

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Reviewable Premiums:

Reviewable premiums are not fixed for the term of the insurance. The monthly payments are usually reviewed annually and can increase over time.

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Guaranteed Premiums:

Guaranteed premiums are fixed for the term of the insurance policy and will not change unless the cover amount or type of cover is changed.

This allows easy budgeting.

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Increasing Cover:

Increasing cover means the amount of cover will increase over time. This can be set as a fixed percentage each year or in line with inflation – the Retail Price Index (RPI).

This is particularly useful for income protection policies or family income benefit which pays an income because the cost of living can increase over time and a fixed amount of cover may not be enough in the future.

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