to Life Assurance
assurance was originally exclusively death insurance. It is
still primarily taken out to provide benefit on death but
in recent decades life companies have introduced choice in
both the length of term of policies, the mix of protection
with a saving element (a unit linked policy) and the type
of protection provided. A policy may also have
a critical illness option which provides for payout other
than in a death situation.
is one of the most common forms of life assurance today, as
lenders require cover as a condition of providing a mortgage
loan. The objective of a policy is to repay the outstanding
balance of your mortgage should you die or become seriously
ill. The lump sum death benefit decreases over time as the
mortgage principal is reduced.
you are dealing directly with a mortgage lender, you will
invariably be offered its own product. However, the Consumer
Credit Act gives you the freedom to shop around.
Illness protection has also become a popular insurance for
individuals who would suffer serious financial hardship if
they were unable to work for extended periods.
much cover do you need?
simple measure is the required lump sum to pay off a mortgage
coupled with the number of year’s worth of your annual income
your dependents will need to keep them financially comfortable,
for as long as necessary.
simplest way is to multiply your income by the total number
of years you think your family will need support.
Relief* On Life Cover for Self-Employed
Finance Act 2001 provides that self-employed persons can claim
total life and pensions cover relief* up to the limits of
15-30% of net relevant earnings as per the chart:
% of Earnings*
* ie earnings from self-employment
or non-pensionable employment after deducting any
losses or capital allowance
The life cover/pension contribution breakdown, subject to
the limits, is up to the individual.
*Note: Tax Relief outlined are those currently applying as