Summary
There are various types of life insurance quotes cover available in the market. Many people are now seeing the benefits of cheaper monthly premiums by moving to pension term assurance (PTA) because of the tax benefits available on the cost of this type of insurance policy. However it is not suitable for all people.
Recently it was revealed that the cost of life insurance has reduced greatly in recent years. So what type of insurance plan is most suitable for you?
Term policies are the cheapest sortof life insurance cover – you pay a regular premium each month for an agreed value of life insurance for set number of years that the policy will run for. If you die whilst the policy is in force, it then pays out a tax free lump sum. If the insurance plan reaches the end of its term and you are still surviving, no benefit is paid out.
There are several categories of term insurance: “level” term where the payout is a set amount; “decreasing” term, which is always significantly cheaper because the sum to be paid out falls each year. With most customers this type of insurance is taken out to insure a mortgage.
“Increasing” term insurance is an option where the amount payable increases annually in line with inflation; this can be an excellent way of protecting your financesagainst inflation.
Joint life plans are very benefitial for couples who need both of their incomes to pay the mortgage because a payout is made if either partner were to die.
Family Income Benefit offers the beneficiaries a monthly income from the date of death until the policy terminates rather than paying out one single capital paymemt.
How much cover you need will relate to your own individual personal circumstances. Most large and medium-sized firms offer a death in service benefit which usually pays out three or four times to your partner if you died whilst still in employment. Hence if you are reasonably confident about staying a long time with your employer, you may decide that paying for extra life insuranc with a separate policy was not required.
The price of life cover depends on a number of factors, namely the length of the policy’s term, the type of policy and certain medical criteria, and certain health issues – whether you are fat or whether you smoke. Insurers are also clamping down on obesity in particular.
There are significant advantages to switching to pension term insurance. If you already have a term insurance cover which pays out a cash sum, you can save a considerable amount on your premiums by changing to a pension term plan. This is is because under new pension arrangements, most customers qualify for tax relief on the money they pay for their life cover if they opt for a pension term assurance (PTA) policy. Pension term assurance is basically the same as the usual term insurance cover in so far as it is still protection-only. So it pays out if you passed away within the term but if you live to the end of the insured period, no payout is given.
However, not everyone will be better off by switching to PTA. For instance, if you bought your life insurance plan a long time ago, the larger premiums that you may now have to pay owing to the increase in your agecould well outweigh the benefit of tax relief. Similarly, if your medical record has deteriorated since you bought your life insurance, you will probably be better off staying with your existing policy.