Life cover is the simplest form of protection. A policy is bought for a fixed number of years and will payout a lump sum if you die during the policy term. Occasionally policies will offer an income as an alternative to a lump sum. Some policies will also pay out if you are diagnosed with a terminal illness during the term and are given 12 months or less to live.

Life cover can be tailored to suit your lifestyle. You can take out cover where the cash sum increases each year in line with the Retail Price Index (RPI). This means the sum when paid out will have increased with the cost of living. This is known as an index linked or an increasing policy and rise with inflation.

Flexible policies

You may want the level of cover to reduce each year. This is most likely to be the case when the policy is taken out to cover a repayment mortgage. This type of cover is generally cheaper. Premiums generally stay the same for the whole policy term.

You may want to change your life cover from a lump sum to an income. Perhaps you want to protect a young family or perhaps you just believe it is more beneficial or sensible to provide an income instead of a lump sum.

Payouts from a life policy are free from income tax or capital gains tax. However, inheritance tax (IHT) may be charged if the payout, when added to the deceased’s estate, puts the whole estate over the threshold for paying no IHT. Talk to our advisers about this as they can write the policy in trust so it doesn’t form part of your estate.