An interview with a financial adviser | 10 questions to ask if you’re looking for Life Insurance
What is life insurance?
Life Insurance is the most basic way to cover or to ensure your family has a lump sum of money. Not to replace you, but to replace the income that you would have supplied to your family should the worst happen.
Can you explain the difference between whole of life and term?
Term policy by its nature, is for a period of time, from one year through to forty years. It will give you a higher sum assure if you were to, unfortunately, die during this period of time. A whole of life plan covers you for (as its name indicates) the whole of your life, therefore it will always pay out. Term assurance is, therefore, risk based, whole of life is guarantee based. You will, therefore, receive a lesser sum assured with a whole of life plan.
How is a life insurance premium worked out?
A Life Insurance policy is underwritten and is based on age, height, weight, prevailing medical conditions (if any) and smoker or non-smoker status.
Are there any exclusions?
There definitely are exclusions as to why you would not be accepted for a Life Insurance policy. It can be due to existing medical conditions (being the main one). Your height and weight can be out of sync and some policies can exclude certain occupations or activities too.
What if the health of a PH changes during the term of the policy?
It is underwritten at the time of risk when the policy is taken out, therefore if your health was to deteriorate during the term of the plan, it will not affect your premiums and the cover will remain in force.
What options can be added to a Life Insurance policy?
When you take out a Life Insurance plan you can take out additional options, such as Family Income Benefit, which will pay out on a monthly basis rather than a lump sum basis, spreading the benefits of the cover to your family. Another additional benefit you could add on to your Life Cover is Critical Illness Cover. You can have renewable and convertible, although these are rarely used now. You can also add increasing or decreasing cover, the decreasing cover is absolutely perfect for mortgage holders.
What is critical illness cover?
Critical illness or serious illness cover is covering you for one of a range of specified illness. There are 31 main illness, too many to list here, and some policies can cover up to 175 specified illness. Its aim is to cover you for an illness where your lifestyle may be affected and then will pay out a lump sum to you, upon diagnosis of one of the specified illness.
Do all life insurance policies come with critical illness cover included?
No, it is an additional benefit that can be added to life cover, for an additional premium. Alternatively you can take out Critical Illness cover on its own, without Life Cover.
What happens if a PH becomes permanently disabled?
Total permanent disability is where you cannot do three of the six activities of daily living. Such as feeding, washing or dressing yourself and being able to move unaided are examples. This is predominantly covered under critical illness policies or other policies such as Income Protection plans.
Are there any alternatives to Life Insurance?
If you are unable to get life insurance due to ill health, for instance, there are options if you are over 50 to take out an over 50’s plan. Another alternative is a funeral plan, you can take out a funeral plan at any age if that was your concern. If you are medically fit but do not want life insurance, you can take out permanent heath insurance which will cover you if you become ill, or you can take out income protection which will cover your income, both can have differed periods between four and fifty-two weeks, dependant on personal circumstances. They can also be increasing, or level premiums, and depending on your circumstances, can be arranged to retirement on a complete cover to retirement basis, or for up to a two-year period of time. The increasing premiums will actually increase the befits upon claim. You can also have accident sickness or unemployment cover, which is a year on year renewing contract, or you can take out a medical insurance hospital plan, which again requires no medical underwriting, it really depends on what you want and what is appropriate to you, which is why we suggest you take advice.