Life Insurance Fact Sheet

Level Term Assurance is a policy that will pay a specific sum if the life assured dies before the policy's expiry date. The sum assured does not vary during the term of the policy.

Decreasing Term Assurance is a policy where the sum assured reduces during the period of the policy, the reduction being for a stated amount each year. The premiums remain constant. Sometimes premiums are payable for a shorter period than the policy term itself.

Increasing Term Assurance is a policy where the sum assured increases during the period of the policy, the increase being for a stated amount each year. The premium will increase correspondingly.

Renewable Term Assurance is a policy, which has a guarantee that, at expiry, a further policy can be taken out, irrespective of the health of the life or lives assured. The amount of cover and the term of the new policy will not, usually, exceed those of the original policy. The new premium will reflect the age of the life or lives assured at the time the new policy is taken out.

Convertible Term Assurance is a policy that gives the policyholder the option to convert it to an endowment or a whole of life policy. Conversion is enabled, irrespective of the health of the life or lives assured, at the time the option is exercised which must be before the expiry of the policy.

Pension Term Assurance is a term policy arranged under the legislation relating to personal pensions. It may be "stand-alone" or part of a plan designed to provide income at retirement. The premiums qualify for tax relief at the plan holder's highest marginal rate of income tax.

Family Income Benefit is a decreasing term assurance policy, which on the death of the life assured, pays out an income each year for the remainder of the policy term, instead of paying a single lump sum.

Mortgage Protection Assurance is a decreasing term assurance policy where the level of cover reduces in line with the reducing amount outstanding under a capital and interest repayment mortgage.

Life of Another is used to describe a situation where the owner of the policy is different from the person or persons whose lives are assured. The owner will pay the premiums and receive the proceeds from the policy.

Waiver of Premium means that the company, usually at extra cost, will pay the premiums if the life assured is unable to work for medical reasons. There will be a "waiting period" between being certified as unfit to work by the doctor and the "waiver" being activated. This period is usually six months. The premiums will be paid until the earlier of the life assured being pronounced medically fit and the policy maturity date. There may be a maximum age after which the waiver will not apply.

Critical Illness Cover pays if a life assured is diagnosed as having one of a specified range of serious medical conditions before the expiry of the policy. Where the policy also includes life cover, the critical illness payment may be in addition to the life cover or may be the early payment of part or all of the life cover.

Terminal Illness Cover means that the death benefit will be paid out early if the life assured is diagnosed as being terminally ill. Typically, the policy must have more than twelve months still to run at the time of diagnosis.

Indexation is an option whereby the cover will automatically increase, usually each year, by a fixed percentage or in line with the increase in either the Retail Price Index or the National Average Earnings Index. There will be no requirement for further evidence of good health but the premium will increase to reflect the additional cover.

Other Points To Remember

• The Key Features Document and illustration you have been given describe in full the features of your particular policy.
• This type of policy is designed for protection only and will never acquire a cash value.
• Where two or more people are named as the lives assured, the policy will specify if payment is to be made on first or last death.
• The premium quoted assumes acceptance on standard health terms.
• Medical underwriting is carried out using, in the first instance, information supplied on the application form.
• This type of policy, provided it is not written as Life of Another, may be put in Trust for named beneficiaries.
• This type of policy, provided it is not written in Trust, may be assigned to provide, for example, security for a loan.
• If used in conjunction with house purchase, your home may be at risk if you do not keep up the payments on the contracts associated with the mortgage.

Life and Critical Illness Cover. You are advised to maintain sufficient life and critical illness protection for the duration of the loan to repay the mortgage in full in the event of your death or being diagnosed with a specified critical illness. This cover is not obligatory and you do not have to address these areas at this time. You are aware that by not addressing this need, this may, in future cause financial difficulties to anyone reliant on you financially.

Mortgage Payment Protection Insurance (MPPI)

Formerly known as Accident, Sickness and Unemployment (ASU) cover, is intended to cover your monthly mortgage payments (i.e. the mortgage loan and any associated premiums for say life cover, associated investment and insurance). In the event of you suffering an accident or becoming ill to the extent that you are unable to earn an income. It will also cover your mortgage payments if you become unemployed, following an initial term (usually six months). The protection from MPPI plans will typically only pay out for up to one year from the date of the event at which gave rise to a claim being made. Thereafter cover will cease. Future claims can be made after a further deferred period.

State assistance with payments of mortgage interest on incapacity is means-tested and subject to limits. Since April 1995 a limit of Ł100,000 applies in respect of all new loans. Assistance is based on a "standard" rate of "eligible" interest regardless of the actual rate of interest payable by the borrower. Only the interest on the mortgage loan is covered. The capital element of a capital and interest repayment loan will not be covered nor will the premiums payable to any investments or protection plans covering the loan.

New borrowers do not qualify for income support for the first nine months of a claim, and after that 100% of interest is payable by the DSS to the lender, subject to the above maxima.

Permanent Health Insurance As a Firm we can offer MPPI plans or an alternative in the form of Permanent Health Insurance (PHI) cover. PHI varies from MPPI in that it does not protect against unemployment. However, from outset, PHI cover can be extended to cover more than just the costs of your mortgage. It can be set up to provide you with a tax-free income for a much longer period. The term selected can take you up to retirement, or until your mortgage ceases or another more suitable period. If you make a claim on a PHI plan, return to work and then subsequently need to make a further claim this will be covered by your plan. If you would like further information on PHI or MPPI cover, please let me know.

Buildings Insurance In addition, it is your responsibility to ensure that suitable buildings insurance is in place for the full reinstatement value of you property before exchange of contracts. We do not offer this type of insurance, however, I am able to introduce you to a firm who offers this facility.