Assurance Companies

By: Katie Jenkins

07 Jun 2010 Tell a Friend

To choose the right policy from the many available from the assurance companies on the market, you need to do some research.  Unlike buying a new computer or appliance, life assurance does not just come down to price.  Of course, there is no point paying over the odds for your policy, but an assurance company should never advise you to downgrade from the right level of cover in order to save money.  There are a number of factors to consider when choosing life assurance, and we explore these below:

Policy Term

Do you want a policy that lasts for the rest of your life, so that your family would receive a lump sum payout regardless of when you were to die? Alternatively, do you only need protection against large debts such as a mortgage or an unsecured loan until you have paid it off?  

A whole of life policy would cover you indefinitely, making this a more expensive type of policy, but obviously one with a more comprehensive level of cover.  The more temporary cover, known most commonly as decreasing term life assurance, would only cover you for the set period of time, after which you would no longer be eligible for a lump sum payout if you were to die.

Critical Illness

Does the assurance company have policies available that would enable you to take out critical illness cover in conjunction with the life assurance policy?  If so, this could cost you less that taking out critical illness and term life assurance separately.  Critical illness cover would enable you to receive a lump sum payout if you were diagnosed with a serious illness during the policy term.  Please note that most assurance companies will specify a list of illnesses that they are prepared to cover.

Exclusions

Pay careful attention to the small print before taking out any assurance policy.  The small print will include any exclusions that the assurance company has placed on the cover.  It's far better to know what is and is not included in the policy before you sign on the dotted line - for something as crucial as life assurance cover, it could be devastating for your dependents to discover that you were not covered when it is too late to do anything about it.

Putting the policy in trust

Normally if you should die, the cash lump sum that is given to your beneficiaries (the people, usually your dependents, whom you have named in the life assurance policy) is included in your legal estate, and is therefore subject to inheritance tax.  This means that they could end up receiving a much lower amount than is specified in the policy.  To prevent this from happening and ensure that your dependents receive the maximum benefit from the life assurance policy, ask that the policy be put in trust for your dependents.  It cannot then be included in your estate, and the payout will not be taxed.  Most assurance companies will do this at no extra cost, but if a solicitor is needed, there may be an additional fee.

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