Single Life - own benefit
The plan is taken out to cover the life of one person, who owns the policy. On their death, the benefits are paid into their estate.
Single Life-life of another
A single life plan on the life of one person, but taken out by someone else, who owns the policy and would receive the death benefits. The plan holder must have an insurable interest in the life of the insured.
Joint Life First Death
Two people are covered but the policy pays out on the first death.
Joint Life Second Death
Two people are covered but the policy pays out on the second death only, nothing is paid out on the first death. This type of plan is used exclusively for inheritance tax planning.
For a person to have an insurable interest they would suffer directly, financially as a result of the death. Those with an insurable interest in another person are:
- A spouse
- A creditor
- An employer
- A business partner
Non disclosure –utmost good faith
The contract between the insurer and the policyholder is made on the basis of ‘utmost good faith’ this means that each party trusts the other party to be honest. The policyholder is trusting that the insurer will pay out in the event of a claim and the insurer is trusting that the policyholder has provided all the facts needed to enable the insurer to decide whether to insure the policyholder and for what cost.
Non-disclosure of relevant facts will endanger the payment of any claim on a policy and anything no matter how insignificant it may seem at the time should be declared so that the insurer can decide for themselves whether it is relevant.
Written in Trust
A policy can be written in trust which is a vehicle that allows one person to provide benefits for another, looked after by a third party. The benefits of putting a policy in trust are:
- The sum assured is outside the policyholders estate
- The trustees have control of the funds, which means they can ensure the policyholders wishes are met
- The sum assured can be paid to the trustees quickly, without the need for probate or letters of administration