Level Term Insurance
If you have an interest only mortgage then a level term plan would be ideally suited to you. With an interest only mortgage, the capital in the mortgage does not reduce over the term of the mortgage and with a level term life cover plan, neither does the sum assured on your life insurance. The sum assured that you decided on when you take out the plan will still be the same amount on the very last day of your plan.
A level term insurance plan can also be used very effectively if you have a repayment mortgage. You can use a level term insurance plan if you want to clear your mortgage and leave some extra money behind for your loved ones when you die.
If you are lucky enough to be mortgage free you are still able to select a level term life plan and this will pay out a lump sum to your family in the event of your death. A level term plan is ideally suited to most as you know that no matter what happens the sum assured will always be what you agreed when you took out your level term insurance plan.
A level term plan can also be a superb way of protecting a personal loan or car finance. By taking out a larger sum assured rather than just enough to cover your mortgage and being able to leave a specific amount when you die, the people left behind will also be able to cover any of your outstanding debts or loans you may have.
Level Term Limitations
A level term life insurance plan is extremely helpful for your family and loved ones to help relieve some of the financial pressures that may be left behind when you pass away as the level term life plan will pay out the agreed lump sum to the beneficiaries in the event of your death. If you have an interest only mortgage and you insure yourself for the mortgage amount then there will be enough to clear the mortgage in the event of death.
However, if you have a decreasing mortgage, a level term life insurance plan would not be the best option for you as you do not have the need for level cover and could end up paying too much for you plan. Please speak to a Proadvice adviser to help you determine which is the best option for you.
As you pay your mortgage each month the amount owing to the mortgage provider is decreasing. If you were to take out a level term life insurance plan then the policy would stay at the original sum assured, which will end up in time being substantially more than what is owed on your mortgage. By taking a decreasing term plan, the sum assured will decrease in line with your mortgage. As the amount you are looking for the insurance plan to pay out decreases over time, a decreasing plan is normally cheaper than a level term insurance plan. The key is not to take out more insurance than you actually need and if a decreasing plan is suited to your requirements and it is more affordable to you than another type of cover then you should go for the most appropriate plan as there is no use in taking out a level term insurance plan out if you cannot actually afford to keep the cover in place and will end up with no cover at all because you have had to cancel your policy as the premiums have become unaffordable. It is always wise to take out an insurance policy that will always be affordable to you for example, if you were to start a family or increase the size of the one you have already, you need to know that you can still maintain your policy premiums.
You need to take time and think carefully about which is the right insurance plan for you. It is an extremely important decision and needs care and attention to detail before committing to taking out the plan. Your Proadvice adviser can guide you through every aspect of this, taking into consideration your needs, your budget and ultimately what you want the plan to do. Your Proadvice adviser will help you to ensure the plan is right for your requirements and is affordable for you to maintain.
Other types of insurance?
There are three other types of life insurance plans to choose from, these are;
A Decreasing Term Policy; this will decrease throughout the term of your plan. The decreasing term policy is usually suited to people with a repayment mortgage. The decreasing insurance plans are the cheapest when compared to level term mortgage insurance and this is because the sum assured decreases over the term therefore the financial risk to the insurers is less the longer you have the plan in place.
An Increasing Term Policy is when the sum assured increases inline with the Retail Price Index (RPI).
The Family Income Benefit Plan pays out a monthly amount rather than a payment as a lump sum which means every month your family will know they have a steady income in the event of your death, just as if your wages were still being paid.
If you were to cancel any of these plans or default on your premium payments there will be no money back, no refund for what you have paid in already and the plan would be cancelled.
Dependent on your circumstances will determine which insurance plan or plans would be most suitable for you.
Please speak to a Proadvice financial adviser today and we can assist you with your options and offer guidance and support.