Life insurance policies

Definition: life insurance can provide you with one of the main two advantages: it can either provide your successors with money when you are going to die or it can be used as a saving plan money to provide a lump sum (or income) on a specified date. In recent years, however, both types of scheme have become more flexible and many policies allow you to integrate features of the other. This can have great advantages, but the result is that some of the definitions seem a bit contradictory. There are three basic types of life insurance: policies of life, term policies and staffing policies.
Whole life policies are intended to pay to your death. In its simplest form, the system works as follows: you pay a premium for each year and, when you die, your beneficiaries receive money. As with a regular household policy, the insurance only valid if you continue payments. If you did not pay a year, and came to die, the policy might be zero and your successors would receive nothing.
Term policy involves a final commitment. As opposed to the premiums payable annually, you choose to make a regular payment for an agreed period of time: for example, that your children have completed their studies, only eight years old. If you die during this period, your family will be paid the sum agreed in full. If you die after the end of the term (when you have stopped payments), your family will normally receive nothing.
Staffing policies are essentially savings plans. You sign a contract to pay regular contributions a number of years and receive in exchange for a lump sum at a specific date. Most of staffing policies are written for periods ranging from 10 to 25 years. Once you have committed yourself, you need to go to pay each year (with the term assurance). There are heavy penalties if, after paying for a number of years, you decide that you no longer continue.
An important feature of staffing policies is that they are linked in with the coverage of the death. If you die until the policy matures, the remaining payments are excused and your successors will be paid a lump sum on your death. The amount of money that you receive, however, vary greatly, according to the charges and how generous bonus insurance company feels it can afford the maturity of the policy. Over the past few years, pay-outs have been considerably lower that their earlier projections may have suggested.
Options. Whole life and endowment policies policy offers two basic options: including the profits or benefits. The difference is very briefly as follows.
Without the benefits. This is sometimes called "guaranteed sum insured. This means, is that the insurance company guarantees you a specific fixed amount (in condition of course you have different terms and conditions). You know the amount in advance and this is the amount that you - or your successor - is paid.
With the profits. You are paid a fixed guarantee sum more added, based on the profit that the insurance company has been investing your monthly or annual payments. Base premiums are higher and, by definition, the element of profit is unknown in advance. If the insurance company has invested your money wisely, a policy ' with profits' provides useful coverage against inflation. If its investment policy is poor, you could pay the premiums higher for the return very little extra. The absence of the money in this scenario could be depressing.
Unit linked. It is a refinement of the policy "whose profits", the investment policy is linked to a unit trust.
Other bases. The premiums can normally be paid monthly or annually, as you prefer. The size of the premium varies considerably, depending on the type of policy you choose and the amount of coverage you want. Also, of course, some insurance companies are more competitive than others. As indications very general, £ 50-70 pounds a month is probably a normal figure of departure. Once more as a generalization, higher premiums tend to give the best value as relatively less of your contribution is engulfed in administrative costs.
As a condition of insurance, some policies require that you have a medical examination. This is more likely to apply if very large sums of money are involved. More generally, all that is necessary is that you complete and sign a statement of health. It is very important that this should be completed honestly: If you make a claim on your policy and it is later discovered that you have given misleading information, your policy may be declared void and the insurance company may refuse to pay.