Life Cover Explained - Weekly Info Column - October 2015

What is Life Assurance?

Life Cover Explained.

We started our weekly information column a few weeks ago with the intention of exploring the less well-known aspects of the life assurance, pensions and  investments industry. What we have found, from the feedback we have received, is that there is a lot of confusion out there about even the more common, day-to-day stuff such as what is Life Assurance or Life Insurance.

So, in this week’s article, “Life Cover Explained” we take a closer look at one of the more basic topics and dispel some myths as well as explain some truths.

We also discuss why life assurance cover is important and how it differs from mortgage protection insurance.

What is Life Assurance? – Life Cover Explained

• What is the difference between Life Assurance and Life Insurance? Answer, NOTHING. They are pretty much two different names for the same thing.
• How does life cover actually work? Answer, QUITE SIMPLY, you propose for cover and, once accepted, you pay a premium to a Life Assurance Company. If you die while the policy is running then the Life Assurance Company pays out a Lump-Sum (Or a regular income) to your estate, giving your “nearest and dearest” a “cushion” to cover the loss of your financial contribution to the household. 
• Do you have to pay into a life cover policy for a long time before it will pay out? Answer, NO. Once a Life Assurance Company agrees to take you on, you are covered right away. You may have paid only one or two month’s premium and if you were to die, the cover would be paid out to your estate. (The only exception to this would be in the case of suicide where usually a waiting period of typically 12 months applies. This can differ between providers.)
• Do Life Assurance Companies pay out many claims? Answer, YES. The average proportion  of life-cover claims that are paid out each year is around 97 out of every 100. The small percentage of claims that are not paid are as a result of what is known as “non-disclosure”; this is where somebody who takes out life insurance cover does not tell the Life Assurance Company about some pre-existing medical condition. This brings us to the next important point…
• Do you need to tell a Life Asurance Company about your medical history? Answer, YES! This is SO important and cannot be over-stated. Quite often, once you disclose a previous medical condition you still get “ordinary rates” for your cover, once the Life Assurance Company has checked the details with your GP. Other times there may me a “loading”, in other words, an increase, to your premium. In rare cases you may be postponed or declined for cover all-together, if the medical condition is serious enough. If you fail to disclose medical details then you may be paying for cover that will never be paid out in any case. So, if in any doubt please make sure to disclose. 

Click here to see more information on this important topic.

• If you have your mortgage covered do you really need any other life insurance policy cover? Answer, PROBABLY. It is true that for most people their biggest bill each month is the mortgage and should you, or your partner die, this bill would no longer need paying as the loan would be repaid by your mortgage protection. However, there will still be other bills that need paying and, in most cases, if you, or your other half is no longer around, neither is your income. You need to replace this income and life-cover is the ideal way of doing this.
• How much life cover do you need? Answer, IT DEPENDS. This is where most people need advice and this is where your Financial Broker comes in to help. We can do a very quick calculation based on your own individual circumstances – financial as well as family – and easily calculate what your need is.

For more on the topic of “Life Cover Explained”, or to get your own FREE quote, without obligation, please contact us.