Family
Income Benefit
This is a life assurance contract
which does not pay a lump sum
during the term, but, in the
event of death, pays a regular
sum after death. The regular
payment is usually made from
the date of death until expiry
of the policy term.
The contract does not contain
any investment element.
Mortgage Protection
Mortgage protection is a type
of term assurance policy used
in connection with repayment
mortgages. The initial amount
of life cover reduces each year,
closely matching the outstanding
capital debt on your mortgage.
Level
Term Assurance
This type of plan pays a lump
sum in the event of death during
the term of the policy. The
contract contains no investment
element. If you were to fall
ill after the policy has expired,
you could have difficulty replacing
the cover.
Convertible Term
Assurance
This contract is similar to
a level term assurance policy
with one distinct difference.
The policy may be converted
into an endowment
or whole-of-life
plan, regardless of state
of health. Clearly, this is
a valuable facility. Higher
premiums are usually paid for
this type of life assurance
compared with level term assurance.
Renewable
Term Assurance
A level/convertible term assurance
policy will expire at the end
of its term at which point,
due to age or new medical conditions,
premiums payable for further
cover maybe more expensive.
To provide some protection against
this eventuality, a renewable
term assurance policy allows
the original policy to be replaced
with a new plan at the end of
its term, regardless of state
of health.
Endowments
A low cost endowment is a combination
of an endowment assurance policy
and a decreasing term assurance
policy. These policies are typically
used to fund a mortgage repayment.
The endowment policy is structured
so that if bonus rates continue
within the levels quoted, the
maturity proceeds should be
sufficient to repay the whole
of a loan (usually a mortgage),
although this is not guaranteed.
On death during the term the
sum assured will be paid by
the combined value of the endowment
and the decreasing term assurance.
A traditional with-profit
endowment policy will add bonuses
to a 'basic sum assured'. This
is the absolute minimum that
could be returned at maturity
if premiums are maintained.
This is not to be confused with
the level of death benefit,
which will be higher, owing
to the additional benefit under
the decreasing term assurance
policy. The return on this investment
depends on the profits made
by the life office and on its
policy as to their distribution
(whether on early encashment
or in adverse market conditions
or other circumstances) and
cannot be guaranteed.
Where unitised with-profit policies
are concerned, bonuses will
be added either by increases
to the unit price or via the
addition of bonus units, where
the price stays the same and
more units are added to the
policy.
A unit
linked low cost endowment
is a combination of a unit linked
savings plan and a decreasing
term assurance.
The endowment policy is structured
so that if the fund achieves
the required annual growth rate,
then the maturity proceeds of
the policy should be sufficient
to repay the whole of the loan.
Although the death benefit will
be designed to always be sufficient
to repay the loan, should the
fund grow below the quoted rate
then the maturity proceeds will
be insufficient to repay the
loan.
If the underlying assets of
the policy perform well and
over the term of the policy,
growth rates exceed the 'required
annual growth rate', the policy
may produce a surplus which
is payable to the policyholder.
The required growth rate on
which the sum assured is worked
out is based on assumptions
quoted in the product literature.
Whole of Life Policies
Whole
of life assurance, as the
name suggests, can provide life
cover without imposing a limited
term. As with endowment policies,
they may be with-profits, unit
linked or on a low cost basis.
There is a choice between the
maximum and minimum levels of
cover available at given levels
of premium. Standard cover basically
allows the same level of life
cover to be kept up throughout
life, as long as the fund achieves
a specified minimum annual growth
rate. If this rate is not achieved,
you will either need to increase
the premium to maintain cover,
or to decrease the level of
cover to a sustainable level.
Whatever level of initial cover
is chosen, that amount is guaranteed
to be maintained for a specified
term (normally 10 years).
Both endowments and whole-of-life
policies are equity-based arrangements
intended for medium to long-term
investment. This means the value
of the policy can be reduced
due to stock market movements,
although it can also rise. This
means you may not get back all
the money you invested.
|
Hedgelands Financial Services,
Hedgelands, Abbotskerswell, Newton Abbot, TQ12 5PW
Hedgelands Financial Services is a trading name
of Honister Partners Ltd. Honister Partners Ltd
is an appointed representative of Sage Financial
Services Ltd, which is authorised and regulated
by the Financial Services Authority. Sage Financial
Services Ltd is entered on the FSA register (www.fsa.gov.uk)
under reference 150452. The information and content
of this website is intended for UK consumers only
and is subject to the UK regulatory regime. The
FSA do not regulate will writing services and some
forms of mortgages and tax planning services. Honister
Partners Ltd Registered Office 1 Nicholas Road,
London W11 4AN. Registered in England and Wales
no. 06923303. |
|
