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Summary
There are various types of cheap life insurance policy available in the market. Many clients are now benefiting from lower premiums by changing to pension term assurance (PTA) because of the tax benefits available on the cost of this type of insurance policy. It is not, however, suitable for all customers.

It was revealed recently that the cost of life insurance policies has reduced dramatically in recent years. How do you know what kind of policy is best for people like you?

Term cover is the cheapest and simplest typeof life insurance cover – you pay a monthly premium for a set value of life insurance for a fixed term that the policy will be in force for. If you were to die during the plans’ term, it then pays out a tax free lump sum.  If the plan terminates and you are still alive, no money is paid out.

There are several types of term insurance: “level” term is where the payout is a set amount; “decreasing” term, which is usually significantly cheaper because the benefit to be paid out drops year on year. Usually this type of insurance is taken out to cover a mortgage.

There is also “increasing” term insurance where the amount payable goes up each year; this can be an excellent way of protecting your financesagainst inflation.

Joint life policies are very benefitial for couples who use both of their salaries to pay the mortgage because a payout is made if either policyholder dies.

Family Income Benefit (FIB) offers the customer’s beneficiaries an annual, quarterly or monthly income from from the date the policyholder dies until the policy ends rather than paying out one cash lump sum.

The amount of insurance you need will depend on your own individual personal circumstances. Most large and medium-sized businesses offer a death in service benefit which can often payout as much as four times to your partner if you die whilst being employed. Therefore if you are reasonably confident about remaining in employment, you may reach the conclusion that paying for additional life cover with another plan is not required.

The price of life cover depends on numerous factors, namely the sort of plan, the number of years it should be in force, and certain medical issues – whether you are fat or whether you smoke. Insurance underwriters are also increasing premiums for those who are obese.

There are big advantages to moving to pension term assurance. If you already have a term policy which pays out a l;arge tax free lump sum, you can make big savings on  your monthly premiums by switching to a pension term policy. The reason is because under new pension regulations, most policyholders qualify for tax relief on the money they pay for life insurance if they opt for a pension term assurance (PTA) policy. This sort of insurance is basically the same as the usual term insurance cover in so far as it is still protection-only. So it pays out if you passed away within the insured period but if you survive, the policy has no value.

However, not everyone stands to benefit from switching to PTA. For instance, if you purchased your life cover a long time ago, the higher premiums that you may now have to pay owing to the increase in your agecould well outweigh the benefit of tax relief. Similarly, if you have been ill since you purchased your life insurance, you will probably be better off keeping your term insurance.