Contents

• Compare Life Insurance Policies
• Life Insurance is Important at All Stages of Life
• When Should Life Insurance be Considered
• Compare Different Life Insurance Policies
• Face and Cash Value

Compare Life Insurance Policies

Life cover is a term often used for life insurance, term life insurance, or death cover. Life cover offers a lump sum payment to your beneficiaries in the event of your death. Some life insurance policies have a clause whereby the benefits will be paid even if you don’t die but are diagnosed with a critical illness and are given no longer than 12 months to live. If you take out a life insurance policy in your own name whereby you are the beneficiary the proceeds will be paid into your estate upon your death, or when diagnosed with a terminal illness with death expected before the expiration of 12 months. It doesn’t matter how many life insurance policies you may have, as they are all unconnected and you, or your beneficiaries, will receive the full benefits when the conditions are met.

Life insurance is an important part of your total insurance portfolio and like other insurances provides financial security when you, or your family, need it most. It can provide sufficient funds to cover any debts you don’t want to leave behind for others to pay, it can extend living expenses for your loved ones even though you are not there yourself to be able to provide such security. With so many different policies available it is essential to learn about the different features that impact upon a policy so that you can make the best comparisons possible.

Life Insurance is Important at All Stages of Life

• Young and single people are developing financially and are often in debt at some point but they are still vulnerable to illness, injury and death as with the rest of the community. Most of us, especially when we are young, tend to believe that ‘it won’t happen to me’. We think we are too young to get cancer or suffer from a heart attack. We all believe we are the best drivers on the road. The reality is young people do suffer the same as anybody else and if something should go wrong it is a nice feeling to know that your passing will not make life financially harder for someone you leave behind.
• Young couples enter into various financial arrangements that could finish up in a catastrophic situation if one was to pass on leaving all the debt on the surviving partner to shoulder alone. When building a relationship it is often built around acquiring a home of your own and putting down the foundations for a solid financial future. It is an exciting time in your life that is full of dreams as you work your way towards your goals with a partner. Even though you may be young, devastation can still occur and if it does it is only right that your partner should not have to suffer financially. You can still provide your partner with a source of income, pay out the mortgage and at least know that your physical loss will not mean financial loss as well.
• Young families have a lot to lose if one of the parents were to be removed from the scene leaving the surviving parent with the task of bringing up the family alone while trying to earn a living at the same time. Having a young family brings with it a natural instinct to protect, nurture and care for those you are now responsible for. You will no doubt be thinking about what you are providing for your family at present as well as what the situation will be in the future such as: education for your children; an adequate home; a reliable steady income; being able to provide for family holidays and recreational activities for the whole family; growing your savings.
• Maturing families look towards building assets and growing income to provide options and financial security for the future and retirement. No one plans to get sick, injured or to die prematurely but it does happen. Your household income has probably peaked by now and the kids are leaving home to start their own lives. Your interests start changing to that of being prepared for your retirement when it arrives. It is not the time to leave you partner at risk if something should happen to you.
• Retirees with an empty nest may be experiencing a relief from a lot of responsibility but the fact remains that the lifestyle you now have deserves protecting and the loss of one partner could still put a strain on the surviving partner to be able to retain that lifestyle. Your life insurance needs may well have lessened as your debts diminish and your children have embarked on their own life pathway. At this stage it is easy to become complacent and feel that you have ‘a few years to go yet’. But what if you haven’t? What would be the real situation with the partner left behind? It could be that you may have more to lose financially now and you have more at stake than you had in the past.

When Should Life Insurance be Considered

Life insurance should be considered when you are looking for insurance that will last an entire lifetime without any increase in the original premium. It is especially important if you wish to ensure that the premiums you pay will not be lost should circumstances arrive where you have to surrender the policy at some period of your life. It is a particularly useful financial tool for asset building and estate planning.

Compare Different Life Insurance Policies

There are many different variations of life insurance, mostly in the way the company treats the particular policy in regards to the investment portion. It is essential you have a strong understanding of the differences between each of these policies when you make comparisons to ensure you find the best plan possible. These differences depend a lot on whether the policy is a non-participating policy or a participating policy. Whether the policy is participating or non-participating depends on how the savings element in the policy is structured:

• A participating policy allows for the savings to share in the profit of the insurance company through the payment of dividends. This boosts the value of the investment each time dividends are allocated.
• A non-participating policy will keep the same face amount throughout the entire life of the policy. It won’t be paid dividends but the premium will be lower.

From these two basic structures further variations have been developed such as:

• Indeterminate premium. This type of cover is similar to the basic life insurance, except for the fact that it makes allowance for premiums to be adjusted. The company reserves the right to change the premium cost up to a certain maximum amount, depending on its investment results, mortality and expenses.
• Single premium. This particular life insurance policy allows for the policy holder to make one large premium payment at the beginning of the policy and no more. This type of policy is more of an investment built around an insurance cover.
• Limited payment. A limited payment policy lets the policy holder cease any further premium payments after a certain period, either based on their age or the number of premiums paid. The premiums will be larger in order to make up for the period when no payments will be required. You will still receive the same amount of protection over your entire life and your savings component will still attract dividends.
• Level premium. This is the most popular of all the life insurance plans. The premium remains the same throughout the life of the policy and must be paid as long as the insured person lives. It is designed so that the extra saving portion in the early years of the policy makes up for the increased risk the insurance company carries in the later years.

It is usual for the premium for a life insurance policy to remain the same throughout the entire life of the policy. This is achieved through the savings and the insurance costs balancing out over the years but there are some insurance companies that will increase the premium at a certain age and then allow it to remain the same for the remaining years of the life insured. It will pay you to closely examine the terms and conditions of your policy so you know where you stand in your particular case.

Face and Cash Value

Life insurance policies have two different values, one being the face value of your policy which is the amount your beneficiaries will receive should you die. The other is the cash value. The cash value increases the longer the policy remains in force and the premiums keep being paid. It consists of the amount of premiums paid, less the cost of administering the policy, in some cases it will also include any dividends that you have chosen to have paid directly into the policy and not taken out as a cash payment. If you surrender the policy for any reason you will receive its cash value not its face value.