Life Assurance
How does Life Assurance work?
Most Life Assurance plans are designed to pay a lump sum of money, payable to a nominated beneficiary, should the insured's death occur within the specified term of the plan. The benefits that are paid from a Life Assurance policy are not subject to capital gains tax and income tax but may be subject to inheritance tax.
The cheapest form of life assurance is "Term Assurance".
As there is no investment element, all of the premium can be used to provide the Life Assurance benefit allowing quite high levels of cover to be achieved from relatively low premiums.
What options are available?
A "Term Assurance" plan normally provides either level cover, i.e. the sum assured does not change during the term of the policy, or decreasing cover, i.e. to protect a capital repayment mortgage where the lump sum needed gradually decreases over the term of the life assurance policy, decreasing cover can also be used to cover a loan.
Critical Illness Cover
Many life assurance plans can also include critical illness cover to provide the lump sum on diagnosis of a specified critical illness if this should occur earlier than death. However, critical illness cover can also be taken out as a stand alone contract.
Life assurance plans can be written on either a single life or joint life basis (Please note that joint life plans normally end on the death of the first life so they will generally only pay out once).
Levels, and bases of, and reliefs from taxation are subject to change and their value depends on the individual circumstances of the investor.