holder. This can be linked to a mortgage or to family. This is not linked to an investment and if not claimed on will not pay out. It can be level term or decreasing term. Level term is a fixed agreed amount that will pay out on claim, that amount will not change unless it is index linked and will rise in line with the index rate in place to over come the effect of inflation on the lump sum. Where as decreasing term, a cheaper option will diminish down on pay out in time, linked normally to a repayment mortgage. Though this might help the effect of inheritance tax. It should be noted that life insurance can be placed in trust that means the policy will be ring fenced from the government taxing your assets over a certain level on death. Family members may be taxed on their total assets at 40% over a set amount but a policy in trust is protected from this tax. The trust should be taken out with the policy at start up, it may not be allowed to be added after a certain amount of time of the policy running. This may change due to new UK Government policies. The amount of cover potentially may cover all the debts including mortgages, loans, credit cards and other debts. Then perhaps it would be wise to add on top an amount that would allow your loved ones to live comfortably after your death. It should be noted that if you are the main earner on death your partner may struggle if only the debts are paid off especially if there are children as well to consider.
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