Clients intending to marry will probably require some level of life cover, for untimely death or permanent disability. Currently, life cover is available in a number of different varieties providing pay out either upon death or upon contraction of a fatal illness. The three principal types of cover are term assurance, endowment assurance and whole of life assurance. Your OFS Adviser will be happy to discuss which policy is most suitable for you.

Many additional benefits can be attached to any of these types of policy, and a brief summary of the major points of each type of cover is detailed below. All three can have an inflation option attached where the level of life cover goes up every year in line with inflation, though the premium level will also increase accordingly. It is usually advisable for clients to take this option wherever possible, especially when children are part of the equation. For example a US$200,000 policy if inflation protected at 6% per annum would grow to US$358,000 over 10 years and US$640,000 over 20 years.

Term Assurance

This is the cheapest form of life cover and is normally written for a fixed term, eg. 20 years. There is no investment element, and if the policy is stopped, nothing would be received. If the life assured were to die whilst the cover is in place, the sum assured of say, US$200,000, would be paid to the beneficiaries. Some forms of term assurance have a conversion option, allowing the policy to convert to either an endowment or whole of life policy at a later date.

Endowment Assurance

This is a combination of life cover and investment written for a fixed term, normally a minimum of 10 years. At the maturity of the policy, a cash lump sum would be received. If the life assured were to die during the period of cover, the sum assured of say, US$200,000, would be paid to the beneficiaries. During the selected term, life cover is given in the event of death. If life cover is no longer needed, the policy could be cashed. However, this type of policy is designed to be held to maturity, so during the early years, the encashment value could be minimal, though there is a growing second-hand market for these policies where higher returns can be achieved. This type of cover is commonly used with mortgages and is more expensive, but can provide the investor with a lump sum on maturity, if selected well.

Whole of Life Assurance

This is a combination of life cover and investment which runs for as long as you continue contributions and is generally the most flexible option if cost is not too great an issue. The policyholder has the benefit of ongoing life cover plus the possible bonus of a lump sum payment on encashment, subject to investment performance and the length of time the policy is held for.

It is possible to issue a joint life policy, which covers both spouses. If either spouse dies, the policy proceeds would be paid to the surviving spouse. It is common to place life policies in trust (a very simple procedure) for the benefit of a spouse (and any future children) so that these fall outside of a taxable estate.