Information On Life Insurance

The non-profit life insurance endowment is a more popular type of contract. A growth bond guaranteeing 9% net would produce £1,538 from a £1,000 investment over five years. For the basic-rate tax­payer not subject to further tax this could be attractive. The pattern of interest rates is always shifting, however, so that it is not possible to predict how attractive the rates companies are offering at different times will be compared with the alternatives. The point is that the company is guaranteeing a rate over a period of years, whereas building societies and most other deposit-taking institutions do not guarantee a rate for more than a few months or a year at the most, except in special cases.

The income bond can be based on the combination of a deferred and immediate temporary annuity. Here the deferred annuity provides for the return of the original capital at the end of the period and the immediate annuity for the income. As noted above, the problem is that the deferred annuity proceeds are subject to basic-rate as well as higher-rate tax. But for the basic-rate taxpayer such plans can still produce a good return. Alternatively, the deferred annuity can be replaced by a non-profit endow­ment, in which case only higher-rate tax is payable on the gain at maturity.

In the case of these income contracts, the gain achieved in the capital return is the difference between the sum that is invested in the deferred annuity or non-profit life insurance endowment and its maturity value. The bulk of the single premium is required to produce the income payments via the annuity, and only a small proportion (depending on the term of the contract) is invested in the capital-producing portion.

Long-term life insurance income bonds for 10 to 15 years are available, and for some retired people these may be preferable to an annuity because they do guarantee the return of capital so that the investor retains control of it. However, there are normally no guarantees as to the surrender value if the investor wishes to withdraw early.

It was stated at the outset that unit-linked life insurance involves the shifting of investment risk from the life insurance company to the individual policyholder. In the ordinary unit-linked life insurance policy the choice is limited to that of a single fund, and in the more sophisticated policies discussed above the investor also has the ability to switch from fund to fund as he chooses. The logical extension of this approach would be for the funds available always to be fully invested in their selected type of asset.

Thus a property fund would always be fully invested in property, an equity fund in shares, and so on. In practice, this does not happen and the investment managers of each fund attempt to improve its returns by altering its content, principally by varying liquidity (the proportion of the fund held in cash) and by altering the type of investments held (for example, switching a major proportion of a property fund from offices to shops or the majority of an equity fund from leading or “blue chip” shares to smaller or “second-line” shares).

Thus in choosing a fund the investor is making a double selection. He is choosing the type of asset preferred (shares, property, fixed interest securities or a combination of these) as having most investment appeal; and he is also choosing the investment manager who will manage the fund(s) for him. For example, during 1973/74 the stock market plummeted from an index level of nearly 400 to one of 146. Some investment managers sold a large proportion of their shares in 1973 and early 1974, and investors in their funds cashing in later in 1974 fared well relative to those who had invested in funds where no such action had been taken. Then in early 1975 the stock market suddenly soared to over 300. Those funds that had sold their shares could not buy them back quickly enough to prevent their funds’ performance being far below that of the fully invested funds over the period of the rally in share prices.

The successful management of a life insurance company is not a simple undertaking, since all the factors mentioned above join up. Consider what might happen if a particular misguided company were to cease requiring medical examinations for people of middle age taking out substantial whole-life insurance policies (where premiums are payable throughout life). All over the country, professional advisors faced with overweight clients in sedentary jobs with general poor health would quickly steer them to this company where they would be able to take out policies for which any other company would charge them far more highly.  

The careless company could wake up three years later when the actuary did his sums and discover that its claims were far higher than predicted because it had taken on a lot of higher than average risks and that the assets acquired by the premiums of policyholders of this class were insufficient to meet the expected liabilities. All the company could do at this point would be to adjust its premium rates upwards for the future new business and transfer funds from its reserves to cover the life insurance claims. Such a transfer would be at the expense of either the shareholders in the company or the policyholders, or both.

The general trend in life insurance over the past two decades has been towards greater sophistication in the investment oriented policies, which have been refined and adapted to or to be “tacked on” when an investment oriented policy is sold. Unfortunately this runs counter to the needs of many people, but we are now starting to see protection policies advocated on their own merits. Since the administration costs of all policies are more or less equal (in terms of documentation, registration, etc.) many companies argue with some justification that the “package” is a more economical way for the individual to buy life insurance, especially if the premiums are low. But in some cases (especially when the premiums are larger) the individual can get better value by purchasing the protection and investment portions of the package separately.

Multiple of Income

This method uses the approach of a multiple of your annual income typically ranging from five to eight times your annual income. This is one of the oldest and best known methods to determine how much life insurance you need, as well as one of the easiest to use. It’s also the most frequently mentioned by financial columnists in consumer publications.

While simple, this earning-multiple method misses a range of important factors. For instance, it ignores household demographics, post savings, social security offsets, housing expenses and taxes among others. It also ignores expected life changes and individual preferences about sustaining the living standards of survivors.

Cover of Debts

This entails buying only enough life insurance to cover debts such as mortgage, student loan bills or outstanding car notes. The issues are similar to the issues for the multiple income approach shown above in that it misses a whole range of factors, such as not considering any future debts such as child care or college education costs. This method is also too simplistic to provide any real value.

 Human Life value Concept

The human life value concept deals with human capital. Human capital is a person’s income potential. We all have a human life value. In wrongful death litigation, human life value is measured daily in court. However, the litigation value tends to be significantly different. Insuring human life is the primary purpose of life insurance. The human life value concept goes beyond numbers and considers the entire impact caused by the loss of a human life and the value to a person’s loved ones.

The human life value concept estimates the insured’s earning for the period of time replacement would be needed. When estimating earnings, future increases in salary may be considered and an average annual salary used. Whether or not to include growth of earnings has a significant impact on the amount of coverage that will be needed.  This can be a good means to determine how much life insurance you actually need. Qualified individuals can help you out.

With life insurance in your hands, you have a financial asset that will not help you but will aid your closed ones when you are gone. You can either take out term life insurance or permanent life insurance. Both are good and will provide your family with the benefits when they most need it. You just need to decide which type of life insurance scheme to choose. Term life insurance is normally cheaper than permanent life insurance as it runs for only a set period of time. People who find themselves with a tight budget can buy this form of insurance. On the other hand, permanent life insurance carries higher premiums and is normally more expensive.

Irrespective of the life insurance product you choose, you should know that the benefits are there to gain. You just need to stay in rule with your life insurance policy for your inheritor to get a hassle free payout after you pass away. In case, you lose benefits or your life insurance policy terminates while you are still alive, it means that you have infringed the policy rules somewhere. For this reason, it remains critical to read the whole life insurance policy carefully before you sign on the papers provided to you by your insurers.

Besides, try to reach an agreement with a reputed insurance company. There are many well known insurance companies in the UK and around the world, to name a few such as AXA, AIG, Legal & General and Scottish Provident among many others. These names alone will help you to trust your insurers keeping in mind that your family will obtain the benefits when they mostly need it. All in all, life insurance remains one of the most bought types of insurance on the market. Then, why lose time when you have such protection waiting to be yours?

Premium protection is an addon to your life insurance plan, it goes by a number of different names with different insurance providers. Premium protection is a more modern way of saying waiver of premium on older traditional life insurance plans.

Premium protection is where you can cover your payments if you were to be off sick from work and were unable to pay your policy premiums. Normally this kicks in after 26 weeks and the plan will start to pay your premiums.

There are a number or different definitions that are applied to your payment protection or waiver of premium option on your life insurance plan. The main and best one is own occupation this would be defined you as unable to complete your occupation in the event of sickness or injury.

The next defintion is any occupation, this is where you were unable to do any job in the event of a accident or illness.

The poorest defintion is called activities of daily living, this is where your would be assessed if you could do 3 or more activities of daily living to justify a claim being paid out. These definitions could be getting from a bed to wheelchair, continence, dressing, mobility, feeding and washing.

So in answert to the original question, yes it was a good idea to add this to your policy, however it is important that you have a look at the small print and make sure you got the best definition for the premum protection. If you have own occupation there is a much higher chance of you getting paid out on this plan than that with activities of daily living.

If you have any liabilities then you should always consider taking out life insurance. Life insurance is there to give you some peace of mind should the worse happen. Specifically for your mortgage a specific form of life insurance can be taken out. This is sometimes referred to as decreasing life insurance. This works by the amount of cover decreasing over the years the policy runs. The cover that is decreasing goes in line with the amount that is owed on the mortgage. The plan can last from anywhere between 5 years and 40 years and can be taken up to your 70th birthday. You can take your mortgage life insurance in a joint format if you want to or on a standalone basis. The joint cover works on a joint life 1st death basis where the policy stops after the first death of one of the parties in the contract.

This is all good advice if you have a repayment mortgage however some of us have interest only mortgages, if this is the case then a level term policy is best. If the amount of the mortgage is staying constant then you need your insurance to remain constant and not reduce. This wouls mean the outstanding liability would always be covered.