What if I've got life cover under my pension scheme?
You may find that if you have a company pension or personal pension,
life assurance is provided. This would mean a lump sum is payable
should you die before normal retirement date. With a company pension
scheme you may find the level of life cover is expressed as a
multiple of your salary. Some employers will only provide this
cover after you've been employed for a certain period. Personal
pensions often pay out the value of the fund on death before retirement.
You should check the benefit provisions of your pension scheme
before deciding how much additional life assurance is required.
What will I get back when my policy stops?
If you have a term assurance or family income benefit plan, nothing
will be payable to you at the end of the policy term. These policies
are designed to provide low-cost protection and pay out only on
death. They don't have any investment or savings element at all
and so don't have any cash-in value.
Can I have a joint policy that covers me and my partner?
Yes, it is possible to have joint policies that will pay out
if either person is to die during the term of the policy. For
a whole life policy being used for inheritance tax planning, cover
would usually continue after the death of the first person, with
benefits being paid on the death of the second person.
How can I be sure of the costs?
Each life assurance company has to decide whether or not you
are an acceptable risk. On the proposal form you fill in, they
will ask questions about your state of health, whether you smoke
or not and family medical history. Your answers determine what
premiums will be charged for the cover you need. Life assurance
companies may request further information from your Doctor or
ask you to undergo a medical if they feel it's necessary, even
so it may not mean you have to pay higher premiums.
What happens if I stop paying the premiums?
With most life assurance policies if you stop paying your premiums
the cover will cease. If you then want to start the cover again,
you will probably have to set up a new policy and you would need
to provide current medical details. You may also find your monthly
premium has changed. Many whole of life policies allow premiums
to stop for short periods, this is known as a "premium holiday".
Whole of life cover and endowment assurance plans have an investment
element, so a cash-in value or surrender value may build up. In
the early years, any surrender value might be lower than contributions
paid in.
What about tax?
Death benefits will normally be free of income and capital gains
tax. Upon death the proceeds will normally form part of your estate
and may be subject to inheritance tax. You can set your life assurance
cover up under trust: payment on death would then be made to the
trustees and under current legislation would not form part of
your estate for inheritance tax purposes. Expert legal advice
should be considered in more complex situations.
