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There are several different types of Life Assurance – all will pay either a lump sum or monthly income in the event of the death of the policy holder.
Why do you need it?
The loss of a spouse or parent can leave dependents with additional issues to cope with other than the emotional. If you are inadequately insured, your dependents may be left with a dramatically reduced household income, which could affect their quality of life. Potentially there may be reduced opportunities for children such as the ability to pay for a university education or difficulties in maintaining mortgage payments on a reduced income.
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In the event of your death, a lending institution will not write off your debt. Rather, they will continue to pursue the debt through your dependents and could, ultimately, foreclose on the loan meaning the loss of the family home.
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LEVEL TERM ASSURANCE (LTA)
Level Term Assurance pays out a fixed lump sum in the event of the death of the policy holder, the amount of cover remains constant over the policy term.
DECREASING TERM ASSURANCE (DTA)
Decreasing Term Assurance pays out a reducing lump sum over the policy term until eventually by the end of the policy the amount of cover has reduced to nil. Often used as a way of protecting a Repayment (Capital & Interest) Mortgage where the loan reduces over the term of the mortgage.
FAMILY INCOME BENEFIT (FIB)
Family Income Benefit is a form of Life Assurance that pays out a regular income rather than a lump sum. Having an income instead of a lump sum in the event of death takes away the worry about having to invest the lump sum. It is often used to replace a percentage of a lost salary.