The Growing Life Assurance Protection Gap

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Life assurance industry experts always bang on about the 'Protection Gap'. This is the difference between the levels of life assurance cover that we have taken out against the amount of cover that the industry believes we need. However, if the latest figure that has been produced by the UK life insurance experts is correct then, as a country we are massively underinsured as the gap stands at a whopping £2.5 trillion, and is growing every year.

We are mainly very good at ensuring that we have the mortgage covered by life insurance should the very worst happen, but it appears that we have totally forgotten all the other costs such as other debts, supporting children and even the mundane, such as living expenses. Of course, those with no dependents have no need of life assurance, but those who do should consider it very carefully.

Unlike most things today, the price of life insurance premiums has actually fallen. In fact, if you compare life insurance premiums to costs ten years ago, they are actually 50% cheaper, meaning that if price was a barrier for most people a few years ago then that situation has changed.

At this point, you may be jumping up and down saying that you are actually ten years older than you were and therefore even though premiums have dropped, because of your age it will still be more expensive. That is a common misconception. Because people are now living longer they pose less of a risk to life assurance companies, and that has helped drive premiums down. Plus, there is more competition meaning that those pressures also force down prices.

Re-visiting the level of your life assurance may also allow you to investigate additional benefit options such as critical life illness cover. Prices will also vary depending upon whether you opt for level term or decreasing term assurance. Level term, as its name suggests offers the same benefits in the case of death over a fixed period, whereas decreasing term reduces the benefits over the period, usually in tandem with your mortgage. As that is repaid, then the amount you would require in cover also reduces.

Recent research produced by the Daily Telegraph highlighted that almost one in three adults in the UK were found to have no life assurance at all. Even though statistically the vast majority thankfully will not require it, if the worst should happen then think of the financial impact on those left behind. Are you happy to live with your own Life Assurance Protection Gap?

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The Growing Life Assurance Protection Gap

Image : http://www.flickr.com

Life assurance industry experts always bang on about the 'Protection Gap'. This is the difference between the levels of life assurance cover that we have taken out against the amount of cover that the industry believes we need. However, if the latest figure that has been produced by the UK life insurance experts is correct then, as a country we are massively underinsured as the gap stands at a whopping £2.5 trillion, and is growing every year.

We are mainly very good at ensuring that we have the mortgage covered by life insurance should the very worst happen, but it appears that we have totally forgotten all the other costs such as other debts, supporting children and even the mundane, such as living expenses. Of course, those with no dependents have no need of life assurance, but those who do should consider it very carefully.

Unlike most things today, the price of life insurance premiums has actually fallen. In fact, if you compare life insurance premiums to costs ten years ago, they are actually 50% cheaper, meaning that if price was a barrier for most people a few years ago then that situation has changed.

At this point, you may be jumping up and down saying that you are actually ten years older than you were and therefore even though premiums have dropped, because of your age it will still be more expensive. That is a common misconception. Because people are now living longer they pose less of a risk to life assurance companies, and that has helped drive premiums down. Plus, there is more competition meaning that those pressures also force down prices.

Re-visiting the level of your life assurance may also allow you to investigate additional benefit options such as critical life illness cover. Prices will also vary depending upon whether you opt for level term or decreasing term assurance. Level term, as its name suggests offers the same benefits in the case of death over a fixed period, whereas decreasing term reduces the benefits over the period, usually in tandem with your mortgage. As that is repaid, then the amount you would require in cover also reduces.

Recent research produced by the Daily Telegraph highlighted that almost one in three adults in the UK were found to have no life assurance at all. Even though statistically the vast majority thankfully will not require it, if the worst should happen then think of the financial impact on those left behind. Are you happy to live with your own Life Assurance Protection Gap?

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Life Insurance Products - Mortgage Protection

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This type of product gives the borrower peace of mind that the mortgage will be fully repaid in the event of his/her premature death and not leaves his/her near and dear relatives in a state of monetary confusion. As a family person and as perhaps the sole breadwinner, the borrower will be secure in the thought that his loved ones will not need to find the money to pay the mortgage each month. In the light of this knowledge many married couples take out a joint mortgage protection policy so that if either one of them was to die during the term of the mortgage, then this policy will ensure that the mortgage will be fully repaid.

There are two types of mortgage protection products: Decreasing Term Assurance and Level Term Assurance.

The decreasing term assurance policy is taken out to protect a capital and interest repayment mortgage. (A capital and interest repayment mortgage not only pays off some of the interest on the mortgage but also reduces the capital outstanding.) If the mortgage repayments are up to date, the capital outstanding will reduce each month. If the borrower or one of the borrowers in the case of a joint policy with a joint protection cover was to die during the term of the mortgage, the capital outstanding at the time of death will be fully repaid.

A level term assurance policy is taken out to protect an interest only mortgage. (An interest only mortgage just pays off the interest and does not reduce the capital outstanding. This means the capital outstanding will not change throughout the term of the mortgage.) So just like it is with the decreasing term assurance policy, if the borrower or one of the borrowers in the case of a joint policy with a joint protection cover was to die during the term of mortgage, the level term assurance policy will ensure that the capital outstanding at the time of death, will be fully repaid.

On comparison, the premium of the decreasing term assurance policy is slightly less than the level term assurance policy premium. While in both policies the premiums are set at the very beginning and remain the same throughout their respective terms, many borrower/s take out a level term assurance policy to protect their capital and interest repayment mortgage. This because there is invariably a surplus amount paid out at the time of death. E.g. a borrower/s takes out a capital and interest repayment mortgage of £100,000 with decreasing term assurance cover. At the time of death the capital outstanding on the mortgage is say £70,000. The life insurance policy proceeds will pay out £70,000 to fully repay the mortgage. However if the borrower/s had taken out level term assurance cover instead, the life insurance policy proceeds will pay out £100,000 leaving a £30,000 surplus for the family to benefit from. So for a slightly higher premium (checkout the comparison website) the benefit one could derive from level term assurance will be greater.

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Life Insurance Products - Mortgage Protection

Image : http://www.flickr.com

This type of product gives the borrower peace of mind that the mortgage will be fully repaid in the event of his/her premature death and not leaves his/her near and dear relatives in a state of monetary confusion. As a family person and as perhaps the sole breadwinner, the borrower will be secure in the thought that his loved ones will not need to find the money to pay the mortgage each month. In the light of this knowledge many married couples take out a joint mortgage protection policy so that if either one of them was to die during the term of the mortgage, then this policy will ensure that the mortgage will be fully repaid.

There are two types of mortgage protection products: Decreasing Term Assurance and Level Term Assurance.

The decreasing term assurance policy is taken out to protect a capital and interest repayment mortgage. (A capital and interest repayment mortgage not only pays off some of the interest on the mortgage but also reduces the capital outstanding.) If the mortgage repayments are up to date, the capital outstanding will reduce each month. If the borrower or one of the borrowers in the case of a joint policy with a joint protection cover was to die during the term of the mortgage, the capital outstanding at the time of death will be fully repaid.

A level term assurance policy is taken out to protect an interest only mortgage. (An interest only mortgage just pays off the interest and does not reduce the capital outstanding. This means the capital outstanding will not change throughout the term of the mortgage.) So just like it is with the decreasing term assurance policy, if the borrower or one of the borrowers in the case of a joint policy with a joint protection cover was to die during the term of mortgage, the level term assurance policy will ensure that the capital outstanding at the time of death, will be fully repaid.

On comparison, the premium of the decreasing term assurance policy is slightly less than the level term assurance policy premium. While in both policies the premiums are set at the very beginning and remain the same throughout their respective terms, many borrower/s take out a level term assurance policy to protect their capital and interest repayment mortgage. This because there is invariably a surplus amount paid out at the time of death. E.g. a borrower/s takes out a capital and interest repayment mortgage of £100,000 with decreasing term assurance cover. At the time of death the capital outstanding on the mortgage is say £70,000. The life insurance policy proceeds will pay out £70,000 to fully repay the mortgage. However if the borrower/s had taken out level term assurance cover instead, the life insurance policy proceeds will pay out £100,000 leaving a £30,000 surplus for the family to benefit from. So for a slightly higher premium (checkout the comparison website) the benefit one could derive from level term assurance will be greater.

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Life Insurance Products - Mortgage Protection

Image : http://www.flickr.com

This type of product gives the borrower peace of mind that the mortgage will be fully repaid in the event of his/her premature death and not leaves his/her near and dear relatives in a state of monetary confusion. As a family person and as perhaps the sole breadwinner, the borrower will be secure in the thought that his loved ones will not need to find the money to pay the mortgage each month. In the light of this knowledge many married couples take out a joint mortgage protection policy so that if either one of them was to die during the term of the mortgage, then this policy will ensure that the mortgage will be fully repaid.

There are two types of mortgage protection products: Decreasing Term Assurance and Level Term Assurance.

The decreasing term assurance policy is taken out to protect a capital and interest repayment mortgage. (A capital and interest repayment mortgage not only pays off some of the interest on the mortgage but also reduces the capital outstanding.) If the mortgage repayments are up to date, the capital outstanding will reduce each month. If the borrower or one of the borrowers in the case of a joint policy with a joint protection cover was to die during the term of the mortgage, the capital outstanding at the time of death will be fully repaid.

A level term assurance policy is taken out to protect an interest only mortgage. (An interest only mortgage just pays off the interest and does not reduce the capital outstanding. This means the capital outstanding will not change throughout the term of the mortgage.) So just like it is with the decreasing term assurance policy, if the borrower or one of the borrowers in the case of a joint policy with a joint protection cover was to die during the term of mortgage, the level term assurance policy will ensure that the capital outstanding at the time of death, will be fully repaid.

On comparison, the premium of the decreasing term assurance policy is slightly less than the level term assurance policy premium. While in both policies the premiums are set at the very beginning and remain the same throughout their respective terms, many borrower/s take out a level term assurance policy to protect their capital and interest repayment mortgage. This because there is invariably a surplus amount paid out at the time of death. E.g. a borrower/s takes out a capital and interest repayment mortgage of £100,000 with decreasing term assurance cover. At the time of death the capital outstanding on the mortgage is say £70,000. The life insurance policy proceeds will pay out £70,000 to fully repay the mortgage. However if the borrower/s had taken out level term assurance cover instead, the life insurance policy proceeds will pay out £100,000 leaving a £30,000 surplus for the family to benefit from. So for a slightly higher premium (checkout the comparison website) the benefit one could derive from level term assurance will be greater.

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Life Insurance Products - Mortgage Protection

Image : http://www.flickr.com

This type of product gives the borrower peace of mind that the mortgage will be fully repaid in the event of his/her premature death and not leaves his/her near and dear relatives in a state of monetary confusion. As a family person and as perhaps the sole breadwinner, the borrower will be secure in the thought that his loved ones will not need to find the money to pay the mortgage each month. In the light of this knowledge many married couples take out a joint mortgage protection policy so that if either one of them was to die during the term of the mortgage, then this policy will ensure that the mortgage will be fully repaid.

There are two types of mortgage protection products: Decreasing Term Assurance and Level Term Assurance.

The decreasing term assurance policy is taken out to protect a capital and interest repayment mortgage. (A capital and interest repayment mortgage not only pays off some of the interest on the mortgage but also reduces the capital outstanding.) If the mortgage repayments are up to date, the capital outstanding will reduce each month. If the borrower or one of the borrowers in the case of a joint policy with a joint protection cover was to die during the term of the mortgage, the capital outstanding at the time of death will be fully repaid.

A level term assurance policy is taken out to protect an interest only mortgage. (An interest only mortgage just pays off the interest and does not reduce the capital outstanding. This means the capital outstanding will not change throughout the term of the mortgage.) So just like it is with the decreasing term assurance policy, if the borrower or one of the borrowers in the case of a joint policy with a joint protection cover was to die during the term of mortgage, the level term assurance policy will ensure that the capital outstanding at the time of death, will be fully repaid.

On comparison, the premium of the decreasing term assurance policy is slightly less than the level term assurance policy premium. While in both policies the premiums are set at the very beginning and remain the same throughout their respective terms, many borrower/s take out a level term assurance policy to protect their capital and interest repayment mortgage. This because there is invariably a surplus amount paid out at the time of death. E.g. a borrower/s takes out a capital and interest repayment mortgage of £100,000 with decreasing term assurance cover. At the time of death the capital outstanding on the mortgage is say £70,000. The life insurance policy proceeds will pay out £70,000 to fully repay the mortgage. However if the borrower/s had taken out level term assurance cover instead, the life insurance policy proceeds will pay out £100,000 leaving a £30,000 surplus for the family to benefit from. So for a slightly higher premium (checkout the comparison website) the benefit one could derive from level term assurance will be greater.

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