OK, let’s get straight into this with some definitions and explanations;
Level Term Life Insurance or as it’s correctly named, Level Term Assurance, is a type of life insurance whereby the sum assured (that’s the amount of insurance, sorry, assurance, you are covered for), stays the same throughout the term (that’s the amount of time you take out the assurance for), of the policy.
So, if you took out a Level Term Assurance policy for 20 years (the term), for £100k (the sum assured), it would pay out £100k in the event of your death or diagnosis with a terminal illness during the policy term.
What’s Terminal Illness Benefit? That’s something that’s included in a Life Assurance Policy and will pay out the sum assured (see above), in the event of you being diagnosed with a terminal illness, usually only if you are told you have 12 or less months to live.
Why do we keep saying Assurance rather than Insurance? Well, insurance is something that might happen. Like you might have a car accident but it’s by no means a certainty, hence car insurance. Assurance is something that will happen. I hate to say it, but we’re all going to die, hence life assurance.
Go on then, what’s Mortgage Life Insurance or should I say Mortgage Life Assurance? Mortgage Life Assurance is a term which is commonly used to describe a product called Decreasing Term Assurance (however, if you took out a Level Term Assurance policy to cover a mortgage then it would in effect be a mortgage life assurance policy). Decreasing Term Assurance is a type of Life Assurance that is used specifically to protect a repayment loan (a loan where both the interest and the amount borrowed are paid back in each installment), such as a repayment mortgage (as opposed to an interest only mortgage where each monthly payment only pays the interest owed on the loan). The sum assured (see above), of a Decreasing Term Assurance Policy, reduces throughout the term. In effect, it’s designed to pay off the amount of your mortgage at any point during the term and no more.
Why would you want a Decreasing Term Assurance Policy rather than a Level Term Assurance Policy? Simply put – it’s cheaper.
Critical Illness Cover – where does that fall into this web or jargon terminologies? So, Critical Illness Cover will pay out the sum assured in the event of being diagnosed with an illness or if you have an accident that leaves you permanently disabled, but which does not have to kill you or be terminal. You could have a heart attack for example, be really ill but unable to make a claim on a Life Assurance Policy. But, if you had a Critical Illness Policy, you could make a claim for a heart attack.
Pro’s and cons of Critical Illness Cover? It covers you for a lot more eventualities. Most of which you are far more likely to make a claim on than a Life Assurance Policy. But it’s also a lot more expensive to have it included.
Anything else we should know about? Waiver of Premium or WOP, is an insurance policy within an insurance policy. If you include it in your policy and are unable to work, after 6 mths it kicks in and effectively pays the premiums for you so that you don’t end up losing your cover from not paying for it.
Indexation or Increasing Cover – is where you can choose to have the sum assured increase year on year to something like the rate of inflation or a fixed percentage like 5%, so that the amount you are covered stays relevant to the value of money. It basically inflation proofs your insurance. The cost goes up on the monthly premium as well, if you choose this option by the same amount.
Is that the lot? No. Far from it. But it covers the basics. If you want to know any more, you’ll have to ask us on the phone.
What about all the above in relation to depression and anxiety? Well, have a read through our previous blogs to get a better idea of where you stand there, but it’s totally possible to get all of the above and more even if you suffer from depression, anxiety or another form of mental health issue. The best thing to do, if you want to know more or talk about your personal circumstances, is fill in your details via one of the ‘get a quote’ tabs and let us know when to call you. We are happy to talk you through anything you want to know more about and explain how it all works specifically to you.