Life insurance level term?

Question

i have bought my partner out of house and now have the mortgage on my own ,i have been looking at level term life insurance for 200k .what happens if i die ,who makes sure where the money goes?? also there is a terminal illness cover with the policy ?? do different companies have different illnesses cover ,are they strictly governed?? any advice please

Answer 1

200K seems a lot.

How much equity is in the house?

What is your life expectancy?

Terminal illness policies have a bad reputation.

If you dies the house will be sold, after repaying what is owed to the lender your heirs will get the rest. That might be enough without you having the added expense of life insurance cover

Answer 2

There are two questions here.

Level term cover for 200k will pay out if you die within the term. I.E. It does not decrease in sum insured as your mortgage gets paid off. That is decreasing term. The bank will have their interest noted on the policy. IF you croak, the claims dept of the insurer will settle the banks interest first and any balance is paid to your estate to be dealt with by your executor as per your instructions.

Terminal or Critical illness cover is different. There will be a list of the illnesses covered and if you develop one you will be paid. These policies are MUCH more tricky as there are several levels of cover. If it is tied to life cover it is probably the most basic. IE If the illness is on the list, you get paid but it is worth reading the terms to familiarise yourself. The person who sold it to you has a legal duty to ensure you understand the extent of the cover.

xxFJ

Answer 3

Level term life cover means just that for the 'life' of the policy it will pay out the insured sum:

so if you take out £200K cover over 10 years and die in that 10 years the insurance company pays out £200K, if you die 10 years and 1 day later then it pays nothing.

In terms of terminal illness insurance this varies from company to company, you need to check the small print some exclude certain types of illness and some say your prognosis has to be a certain time period (say 1 year). The more comprehensive the cover the more expensive the policy normally.

so do you want your life cover to pay out if you are diagnosed with cancer say but told you have a 5 year life expectancy?

Get a copy of the terms and conditions of the policy and read it carefully.

Presumably you are buying off an advisor of some kind, they should answer your questions. Most financial products are regulated by the FSA

Answer 4

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Answer 5

Level term is a policy that will pay out a guaranteed amount if you die during the term of the plan.  In your case £200,000.  On death this money will be paid to your estate and this will be used to clear any outstanding debts.  It is unlikely that your life assurance policy is assigned to your lender as this is quite an old fashioned approach.  Terminal Illness cover is normally automatically added to these contracts.  PLEASE NOTE THAT THEIR IS A HUGE DIFFERENCE BETWEEN CRITICAL ILLNESS AND TERMINAL ILLNESS COVER.  with terminal illness cover you have to be dying and normally have less than 18 months to live.  The reason that this is now a common feature of this type of insurance is that the insurer knows that they will have to pay out and they may as well do it on diagnoses rather than death.