Different types of life assurance policies
Life assurance can offer protection not only in the event of your death but also to cover your mortgage.
Term Assurance
Term Assurance is a life insurance policy which offers a monetary value for the life of a person in the event of their death. Term assurance is the cheapest and simplest form of life cover; you pay a fixed monthly premium.
There are two basic types of Term Assurance cover:
- Level Term Assurance (LTA) extends the same level of cover throughout the policy term. LTA policies are sometimes used to provide life cover protection in conjunction with interest only mortgages (in the absence of an endowment policy) such as those backed by either a pension or Individual Savings Plan (ISA)
- Decreasing Term Assurance (DTA). As the name suggests, such a policy pays out an amount (sum assured) which reduces throughout the term of the plan. DTA plans are mainly used to protect repayment mortgages and some business loans.
Mortgage Protection
These policies protect the actual mortgage payment. A Decreasing Term Assurance policy (DTA) can be used for this purpose.
You may generally cover up to 125% of your monthly payment to include related expenses, i.e. life policy premiums, council tax etc. The policy provides disability and optional unemployment cover, and benefits are payable for up to 12 months.
Family Income Benefit
These are policies for people with young families who wish to protect themselves whilst their children are growing up.
These plans pay a fixed annual income in the event of death for the remainder of the policy term.
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