Luke Ashworth writes for Protected.co.uk, offering views on life insurance in the UK, visit www.protected.co.uk today and compare life insurance plans in minutes.
Everything in life has a risk; you cross the road and take the risk of being run over. The risk is minimised by knowing about it and taking precautions to avoid the danger, for example looking both ways or using a crossing.
The risks that need to be taken into consideration for a term life policy are detailed below:
Term assurance products do not contain an investment element, and therefore they have no cash in value and you do not get a payout at the end of the contact. It pays out only on the death of the life assured
It is important to remember that you will be making a long term commitment. If you stop your payments your cover will stop and therefore your family may suffer financial hardship should the life assured/main earner die prematurely. Therefore it is important to ensure that you can afford the premiums for the length of time the policy covers.
If a person covered by the policy dies then payments cease when a claim is made.
However if it was a joint policy the remaining partner will now have no life insurance and should reassess their insurance needs and take out an appropriate policy.
The cover may be less than you need if you do not review it regularly to keep it in line with your earnings. Inflation may have grown faster than your initial calculations or your standard of living has increased due to for example a better paid job or a partner returning to work and therefore a top up policy may be needed.
It is worth looking at your life insurance needs at least annually or if a family event such the birth of a child has occurred and you now feel there is a need for an increased amount of cover.
The current law and Inland Revenue practices may be subject to alteration in the future. If changes are applied retrospectively then your term contract may be affected and therefore need reviewing as changes in tax treatment may change the amount paid out
If you have not disclosed any material fact concerning your health/lifestyle when applying for a policy the insurance company may refuse to pay out a claim on your death. This would leave your dependants financially insecure.
Check if there are any exclusion clauses and if these would impact on a potential claim.
You may wish to extend the term of the policy, however once it is up and running this is not possible.
If you have contracted an illness during the term of your policy it may be difficult to obtain further cover once the policy has come to an end.
As with crossing the road these risks can be minimised by regular checks that your cover meets your lifestyle. After all you look both ways every time you cross the road not just on the first occurrence, therefore doesn’t it make sense to look at your life insurance cover periodically to ensure you check the risks.
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