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Personal Life or Critical Illness Cover

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A Life Insurance policy provides a lump sum of money for the insured’s family, business members in the event of the policyholder’s death during the term of the policy. It is primarily designed to help protect the family or the business from financial hardship by providing the means to pay off the outstanding loans or mortgages and/or by providing cash to the family or business to help them carry on without financial worries.

Most life insurance policies cover a fixed term, often linked to the duration of a mortgage, and therefore Life Insurance can also be known as Term Life Insurance, Mortgage Protection, Life Insurance and Term Assurance.

What type of Life Insurance is required?

If the policy is to be used solely to cover a repayment mortgage, then a decreasing term Mortgage Life Insurance product is usually the best choice, as the amount of money the policyholder has been insured for decreases in line with the value of the outstanding mortgage balance.

Conversely, a level term life insurance product is usually the best choice for an interest-only loan or mortgage, where the value of the outstanding loan/mortgage balance remains constant during the term of the policy.

Level term Life Insurance is also the preferred choice for the other main usage for term life insurance, namely providing family or business protection It is often advisable to consider an index-linked policy in this instance to counteract the effects of inflation on the value calculated to provide sufficient protection for the family. This is also sometimes known as Increasing Term Assurance.

How much Life Insurance is required?

The amount of cover required is always going to depend on an individual’s personal or business circumstances. Essentially, you need to work out the financial impact to your family or business in the event of your death, and how much money they would need to survive.

Additional Cover Including CRITICAL ILLNESS

Most leading life insurance policies include Terminal Illness Insurance at no extra cost. In the event that the policyholder is diagnosed with a terminal illness (defined as where life expectancy is less than 12 months), then the insurer will agree to pay the amount of money insured on diagnosis rather than death.

Further cover can be provided with Critical Illness Insurance, which pays out the amount of money insured should the policyholder be diagnosed with having one of the specified Critical Illnesses. Not all companies have the same Critical Illnesses, so it is important that the policyholder is familiar with the inclusions and exclusions before any documentation is signed.

Critical illnesses covered by each policy will differ from provider to provider. If not listed in your policy they won’t pay out. Checking the small print and terms of coverage is vital. In general, most policies will cover some forms of these illnesses:

  • Blindness – permanent and irreversible;
  • Cancer – excluding less advanced cases;
  • Coma – resulting in permanent symptoms;
  • Deafness – permanent and irreversible;
  • Heart Attack – of specified severity;
  • Kidney Failure – requiring dialysis;
  • Stroke – resulting in permanent symptoms.

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