How Life Assurance Works For You And Your Loved Ones?

Life Assurance and Life Insurance, whilst technically different, both work in the same way when providing protection for you and your spouse. For the purposes of this article it is assumed (except where stated) that they are the same when explaining how they can work for you.

What does Life Assurance do?

Life Assurance is a form of financial protection that provides a lump sum in the event of the death of a life assured. The policy can be set up so that one partner (policy owner) insures the life of the other (Life Assured) to protect against the financial consequences of a death.

There are other forms of Life Assurance that protect against being diagnosed with a Critical Illness or against the loss of income in the event of long term illness or disablement. These policies work in a similar way to pure Life Assurance and in the event of a claim, a similar process is applied.

Having bought Life Assurance, what happens?

Assuming that you have bought a life assurance policy on either or both of your lives, you will continue to pay premiums for the term of the policy. In the event of the death of the life assured or one of the lives assured for joint policies, you need to make a claim.

For Critical Illness and Income replacement insurance, on diagnosis of the illness the claim is then made.

How long does cover last?

Depending on the type of Life Assurance policy, the term will last as long as stated on the policy schedule or the death of the Life Assured, if earlier. A Term Assurance policy will last for the agreed length of time. A Whole of Life policy is different in that the term is until the death of the Life Assured.

What happens if the policy is cancelled before the end of the term?

At the end of the term of a Life Insurance policy (or cancellation before the end of the term) there will be nothing paid out. Whereas a Life Assurance policy may have a value at the end of the term or alternatively may accumulate a cash value if surrendered before the end of the term.

What happens in the event of a death of a life Assured?

The first thing to do is to notify the insurance company of the death. They will then send out a claim form that needs to be completed and returned with the death certificate. The insurance company will under take certain checks and on receipt of all the necessary documentation they will make a lump sum payment of the sum assured.

What do I do with the Life Assurance payout?

Simplistically you can do whatever you want with a payout. However if there is a family involved, the usual process is to invest the lump sum in a way that will pay out a regular income to your loved ones to help them with the financial burden of continuing their existing lifestyle.

This article is for guidance only and must not be construed as advice. The contents of this article are aimed at the UK market, although many countries will have similar policies available. If you need advice you should refer to a Financial Adviser.

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