What is it?
A policy that pays out a lump sum or income to dependants in the event of your death.

Why do you need it?
The loss of a spouse or parent can leave dependants with even more problems to cope with than the emotional. If you are inadequately insured, your dependants could be left with a dramatically reduced household income, and therefore quality of life, reduced opportunities for children such as the ability to pay for a university education and even no home if mortgage payments can’t be maintained on the reduced income!

In the event of your death, a lending institution is not going to write off any of your debt. Rather, they will continue to pursue the debt through your dependants and could, ultimately, foreclose on the loan meaning the loss of the family home.

What will the State provide?
The main benefits the State may provide are the Widowed Parent’s Allowance and Child Benefit. Depending on whether the widow(er) qualifies for Income Support, the State may or may not help with paying the mortgage interest.

The method for calculating which benefits an individual may qualify for is extremely complicated. More information is available at the Department of Work and Pensions website www.dss.gov.uk

Things to bear in mind
There are many different types of plan, designed to address different shortfalls, these include:

* Level Term Assurance – Pays out a set amount of money in the event of a successful claim. These are good for personal or family protection or to protect interest only mortgages

* Decreasing Term Assurance – Pays out a lump sum that decreases annually as the policy term progresses. These are good for repayment type mortgages

* Family Income Benefit – Pays a stepped benefit that can be received monthly or annually