Mortgage Payment Assurance (MPA) decreases specifically in line with the mortgage debt, while Decreasing Term Assurance (DTA) typically reduces by a nominal interest rate each month, such as 5 per cent.
The policies are slightly different, and clients should be aware of what their decreasing policy is linked to, to ensure any mortgage debt will be completely paid off in the event of a claim.
Family Income Benefit (FIB)
FIB is a form of life cover that pays an income instead of a lump sum, designed to be used to cover family expenses if one of the breadwinners or care givers were no longer around.
Family Income Benefit is considered to be a much undersold product. It offers good value compared to other forms of life cover and because it pays an income rather than a lump sum, the family knows it will cover them for the number of years they need it to, rather than having to try to invest a lump sum to make it last.
FIB can be set up to run until people’s children are likely to no longer be financially dependent on their parents. The premiums are good value compared to level term life cover because the payment received under a claim can vary.
If a family is insured for 20 years at £1,000 month, and they claim in year five, they will get 15 years of payments at £1,000 per month. If they claim in year 18 they will receive £1,000 a month for two years.
Most FIB plans also offer the option to commute to a lump sum in the event of a claim.
Whole of Life Cover (WOL)
Whole of life cover is a policy that will pay out when you die. As the name suggests, it runs for the whole of your life. It can be set up to mitigate an inheritance tax bill, offer financial security for family or cover funeral costs.
Recently, VitalityLife revitalised its whole of life plan to give policyholders flexible pricing in the future, to reflect health status and long-term interest rates. Traditional whole of life plan premiums are set at the start and remain the same for the life of the policy.
So you pay the same, regardless of whether factors like your health improves or Long-Term Interest Rates rise.
Long-Term Interest Rates are a significant element in the price of whole of life polices - the higher the interest rate, the lower the price of a plan and vice versa. People can also receive a discount if they engage in healthy activity.
