Life cover will help your partner or your family keep up the lifestyle they're used to if you die or become terminally ill by providing a guaranteed lump sum or an income.

Like most insurance policies a life insurance policy needs reviewing regularly as family circumstances can change quickly and if the policy is not reviewed you may become under-insured, or become over-insured and subsequently be paying too much for your insurance.

You can also combine Critical Illness Cover with your Life Cover.

Most people have two main protection needs that can be covered by life insurance:

• Paying off large debts like your mortgage
• Family protection, where you leave behind money for your family to live on after you've died.

Different types of insurance policy are good for different protection needs.

Term assurance

The most basic type of life insurance is called term insurance. With term insurance you choose the amount you want to be insured for and the period for which you want cover. If you die within the term, the policy pays out to your beneficiaries. If you don't die during the term, the policy doesn't pay out and the premiums you've paid are not returned to you.

There are two main types of term assurance to consider – level-term and decreasing-term insurance. Sometimes a combination of the two may be the best answer.

Level-term life insurance policies

A level-term policy pays out a lump sum if you die within the specified term. The amount you're covered for remains level throughout the term. The monthly or annual premiums you pay usually stay the same, too.

Decreasing-term life insurance policies

With a decreasing-term policy, the amount you're covered for decreases over the term of the policy. These policies are often used to cover a debt that reduces over time, such as a repayment mortgages.

Premiums are usually significantly cheaper than for level-term cover as the amount insured reduces as time goes on. Some types of decreasing-term insurance policies can also be used for inheritance tax planning purposes.

Whole-of-life policies

Whole-of-life policies are ongoing policies that pay out when you die, whenever that is. Because it's guaranteed that you'll die at some point (and therefore that the policy will have to pay out), these policies are more expensive than term assurance policies, which only pay out if you die within the term.

Trusts

As part of our holistic advice Merdon Financial will guide you through this process.

The life insurance company can usually pay a death claim more quickly than they could if it were not put in trust. If a life assurance plan is in trust, it is no longer part of the settlor’s estate. So if they die, the trustees claim on the life assurance and the death benefit money is paid directly to the trustees. If a life assurance plan is not in trust, the amount of money a person has as life assurance is added to the rest of their estate if they die during the plan term. This means that people that are to distribute the estate would need to get a grant of probate before the insurance company could pay out any money. This can take several months