Life Protection Insurance Does What it Says

 There is no insurance in the world, of course, that actually prolongs your life or delays the date of your death. What life protection insurance does offer, however, is the chance to ensure that, in the event of your untimely or unexpected death, your loved ones and dependants receive an added degree of financial support by way of a guaranteed insurance benefit. In this way, the insurance does exactly what it says by providing an assured level of financial protection for your surviving dependants.

The principle of this type of insurance is well-established. Indeed, it is generally accepted that life insurance grew out of the practice of many "friendly societies", mainly in working class areas of the north of England, one hundred or so years ago, of encouraging people to save for their own funeral expenses by saving a small amount of money each week. Their families would thus be relieved of the burden of such expenses at the time of their death. Clearly, however, life insurance - and the particular forms of protection it brings - has come a long way since those days.

One of the most common forms of life protection insurance looks to ease the immediate financial hardship of the death of a breadwinner or principal carer by paying out a benefit that might be used by the surviving beneficiaries in any way they choose. In other words, the payout is available for repaying outstanding debts and credit, perhaps cover the rent or mortgage repayments for some months, or simply provide an alternative source of income on which the family might survive.

The actual amount of the benefit received by the beneficiaries is determined by the policyholder at the outset, after which, all that is required is the payment of the relevant fixed-rate insurance premium each month.

For many families, of course, one of the major financial commitments each month is to the repayment of the mortgage. By the same token, many breadwinners might want to avoid leaving a large mortgage, with little or no income with which to make the repayments, hanging over the heads of their family in the event of their unexpected and untimely death. Life protection insurance is designed to avoid leaving the survivors in the lurch by ensuring that the benefit paid out is sufficient to pay off the mortgage and, thus guarantee the family with a roof over their heads.

It is an interest shared by the mortgage lender, too. The lender wants to avoid a situation in which the death of the principal income-earner puts mortgage repayments in jeopardy. For that reason, many banks and building societies make adequate mortgage life protection a condition of the loan being advanced in the first place.

Life protection insurance has become an increasingly flexible means of safeguarding the financial future of dependants and loved ones. It is possible, for example, to ensure that the insured benefit grows steadily - by a predetermined percentage - over the years through an increasing term life insurance policy or by linking the assured benefit to changes in the index of retail prices through index-linked term life insurance.