PROTECTION
It is possible
to ensure against three major categories of event: death, a critical illness
and sickness or injury sufficient to prevent you from working. In each
case there are a number of ways of insuring against the risk.
Payout
on death:
- Term
Assurance
This type of policy provides a lump sum payment on the death of the
life assured. The level of cover, term and premium are fixed from outset.
- Whole
of Life Assurance
A Whole of Life Policy is a life assurance contract that has no specific
term. It provides life cover for as long as you wish to continue to
pay the premiums required. This is a flexible policy under which you
can select the most appropriate premium and cover level.
The selected
premium is invested into a unit linked managed
investment fund and each month a deduction is made from the fund to
pay for the cost of life cover. The level of premium selected will dictate
how long the amount of sum assured on death will be able to be maintained,
without a change in premium.
The investment
growth rate within the fund will also be a factor as this could lead to
benefits being maintained for a longer or shorter period, if the performance
of the fund is higher or lower than the rate assumed for calculation of
the premium.
- Mortgage
Protection Assurance
Sometimes called a decreasing term assurance policy. This type of policy
provides cover for the original level of the mortgage
but then reduces as the mortgage balance reduces. This keeps the payments
to a low level.
Payout
on Critical Illness:
This type
of protection pays either a lump sum benefit or can provide income payments.
Payout is made on diagnosis of a critical illness.
The main
illnesses covered include: - Cancer, Heart Attack, Kidney Failure, Stroke
Coronary Artery Disease, Major Organ Transplant.
Critical
Illness policies can be written on a Term or a Whole of Life basis.
Payout
on inability to work:
- Income
Protection or PHI (Permanent Health Insurance) policy
In this case the income itself is insured. If the insured cannot work
through sickness or accident (not redundancy), then a monthly income
is paid out.
The contract usually covers to retirement age and payments start after
a period chosen at outset; usually 4, 13, 26 or 52 weeks.
PHI policies can be written on a term or a Whole of Life basis.
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