Life Assurance Plans
The reviews carried out by insurers in Reviewable life assurance policies take into account mortality, expenses and investment returns.
With a Standard Cover unit-linked whole life policy, the premium level is set at such a rate that it need not be increased over the insured person’s lifetime as long as the underlying fund meets a pre-determined rate of return
Maximum Cover Plans
The features of Maximum Cover Plans are:
- Premium is fixed for set period of, say, 5 or 10 years
- Premium is revised after set period
- A fund with a small surrender value may build up
Guaranteed Cover Plans
The features of a Guaranteed Cover unit-linked whole life policy are:
- There is no investment although there may be a surrender value.
- There is a guaranteed level of cover throughout the term.
- It used to be called ‘Whole Life non-profit assurance’
Term 100 term assurance policy
A Term 100 term assurance policy is written to age 100 and can be used as an alternative to a whole life policy. The disadvantage of a Term 100 policy is that people are generally living longer so it is possible that the life insured could still be alive at age 100 and there would be no cover.
Return of Premium term assurance
A Return of Premium term assurance pays out on death within the term, like all term assurance, but also returns the premiums paid if the life assured survives until the end of the policy.
Family Income Bond
A Family Income policy might be cheaper than level term assurance for the same sum assured because the sum assured decreases like decreasing term assurance. The total of the instalments payable on death early in the policy term is greater than on death later in the policy term.
The features of a Family Income Bond policy are:
- Similar to decreasing term assurance
- Regular payments can be commuted into a lump sum once death has occurred. Where this is the case, a rate of interest is used to reduce the amount that would have been paid over the remainder of the term due to early payment.
- Payments can be level or increasing (called escalating), eg, by 5% per year
Relevant Life Policy
A Relevant life policy is a type of term assurance policy taken out be an employer and designed to provide death-in-service benefit for an employee. It is normally used by smaller companies without access to group life schemes. The features of a Relevant Life Policy are:
- It will be held under a discretionary trust with the employee’s dependents as beneficiaries
- It allows up to 4 x salary as life cover with greater amounts available to buy an annuity
- Premiums will be paid by the employer and treated as an allowable business expense for corporation tax purposes.