Summary
There are various types of life insurance cover  cover available in the market. Many clients are now reaping the benefits of more economical monthly premiums by switching to pension term assurance (PTA) because of the tax benefits available on the cost of this type of insurance arrangement. However it is not 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 plans are the simplest typeof life insurance plan - you pay a premium every month for a set value of cheap life insurance for a fixed term that the policy will run for. If you die whilst the policy is in force, it then pays out a lump sum.  If the insurance plan terminates and you are still surviving, no money is paid out.

There are several categories of term insurance: “level” term is where the payout is a fixed amount; “decreasing” term, which is often a lot cheaper because the cash to be paid out drops year on year. In most cases this sort of insurance plan is taken out to insure a mortgage.

“Increasing” term insurance is an option where the insured sum rises a bit each year during the course of the term; this can be a good way of protecting your coveragainst inflation.

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

Family Income Benefit (FIB) offers the beneficiaries a monthly income from from the date the policyholder dies until the policy comes to the end of its term rather than paying out one lump sum.

The value of insurance you need will relate to your own individual circumstances. Most medium and large sized firms offer a death in service benefit which usually pays out three or four times to your partner if you die whilst being employed. Therefore if you are reasonably confident about staying a long time with your employer, you may decide that paying for additional life cover with another arrangement was wasteful.

The price of a life insurance plan depends on numerous factors, for example, the type of policy, the length of its term, and certain health criteria, and certain medical criteria - whether you are over-weight or whether you smoke. Insurance underwriters are also increasing premiums for those who are obese.

There are serious advantages to switching to pension term assurance. If you already have a term insurance cover which pays out a tax free lump sum, you can make savings on  your premiums by changing to a pension term plan. The reason for this is because under new pension arrangements, most policyholders qualify for tax relief on the money they pay for life insurance if they opt for a pension term assurance (PTA) policy. PTA is basically the same as standard term insurance cover in so far as it is still protection-only. So it pays out if you were to die within the period the insurance was in force but if you live to the end of the insured period, the policy has no value.

However, not everyone will be better off by switching to PTA. For instance, if you purchased your life assurance a long time ago, the larger premiums that you may now have to pay because you will then be oldercould well outweigh the benefit of tax relief. Similarly, if your medical record has deteriorated since you purchased your life cover, you will probably be better off staying with your existing policy.

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