How Life Assurance Gives You Extra Security

Life assurance is a product offered by insurance companies

, but a very different policy from life insurance itself. With life assurance, the contract that is made between the insurance firm and the policy holder agrees to make a payment on the policy after the individuals death or in some cases, in the event of their terminal or critical illness.

This is a policy based upon a definite event, not the risk of an event as in life insurance. A life assurance policy also relies upon the policy holder paying regular sums or premiums into the policy. The payout itself is made to beneficiaries designated by the policy holder.

At first, the premium tends to be a fixed sum for a 10-year period. After this date, the sum comes under review and the insurer decides whether the investment fund is growing sufficiently to provide the required final sum. If it is not, either the premium will have to be raised or the eventual payout will have to be reduced.

Life assurance is commonly taken out in situations when the policy holder wants the peace of mind that comes from knowing their family and other loved ones will be looked after financially in the event of death. Again, this differs from life insurance, where the value is determined by the risk of a catastrophic personal event taking place.

Circumstances which a policy holder would wish to provide for typically include mortgage repayments, replacement of salary, or paying for childcare costs. They can even cover education costs, such as school or university fees.

There are limitations to the conditions upon which a person is able to take out a life assurance contract though. They are there to ensure that suicide or criminal fraud is not rewarded, or that the insurer does not become liable for events such as war, riots and civil disturbances.

In the UK, policy holders are not usually allowed to offset their life assurance costs against income or corporation tax. The only major exceptions are with policies that were drawn up before 14 March 1984, which qualify for 15 per cent Life Assurance Premium Relief. However, the ultimate payment of a life assurance policy to a beneficiary is not liable for income or corporation tax either, making it a very reliable contract. It is important to remember, however, that a life assurance policys payout will be liable for appraisal as part of the UKs death duties, unless it is written into a trust.

How Life Assurance Gives You Extra Security

By: Kim Chambers

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