No, Life Assurance pays out in event of your death.
Critical illnesses are more common than people tend to believe and can affect anyone at any time. A number of critical illnesses are being diagnosed at a younger age. In fact in 2009 the average age of critical illness claimants was just 44 years old.
Policies can include something called 'Terminal Illness Cover'
that will allow, at the insurer's discretion, an early payout of
your policy if you are diagnosed with a terminal illness where you
will die within 12 months.
This is offered as a goodwill gesture by the insurance companies to
allow you the opportunity to settle your affairs and make your own
arrangements before ou die.
It is important to understand that this is not the same as Critical
Illness over and will only be offered for conditions where your
doctor has told you that you will die within 12 months.
Taking Life and Critical Illness Cover together can insure you are fully protected against the eventualities of death and of contracting a critical illness such as a heart attack or stroke. It can also serve to reduce Critical Illness premiums compared to taking Life Assurance and Critical Illness Cover separately.
Your policy can include an option called 'index linking' that
allows it to increase on an annual basis to offset the effects of
inflation and increases in the retail price index.
This is important because in time the real time value of your
payout will decrease. In other words what you can buy for £100,000
today will not be the same in ten years time. Index-linking your
Life Assurance policy will allow it to maintain that value.
At the time of your death your insurance payout will not be the
first thing your family will want to think about. However, it may
be necessary to cover your funeral expenses or pay off your
mortgage. As such, it is important that the process for ensuring
your family is paid quickly is in place.
Normally your life insurance payout would be paid into your estate
and left to the process of probate to decide how it should be
divided up and used. Unfortunately probate can be a lengthy process
(at times up to 6 months) especially if your will is
contested.
One way to avoid the probate procedure for your life assurance is
to have your policy written into a trust. Doing this allows you to
nominate to whom the payout should be made, meaning that it is paid
out to the intended recipient must more quickly.
As an added benefit, writing your Life Cover policy into a trust
can also help to limit the effects of inheritance tax on your
estate as this payout would no longer form part of it.
Having your policy written into a trust can normally be done at no
extra charge as long as you include it when applying for the
policy.