What is the difference between lump sums and monthly payments?
Some types of life insurance are designed to pay a one-off amount, while others provide regular monthly payments for an agreed period of time. Here’s a summary.
A lump sum pay-out from life insurance
There are types of life insurance that pay a lump sum if you suffer a serious medical condition, are never able to work again and dying. These are:
Trauma cover, which pays out for a range of specified medical conditions and their definition as set out in the policy document. This could help you to focus on getting better at a time when you may not be able to work.
Total and permanent disability cover, which pays out if you’re totally & permanently disabled and unable to work ever again. Payment could be helpful to pay for accessibility aids that may be required or assist with certain disabilities.
Life cover, which pays out if you die or are diagnosed with a terminal illness and you have less than 12 months to live. A payment can help towards paying off large debt like home loans.
Monthly pay-outs from life insurance
These types of life insurance are designed to provide an ongoing income for a specific period of time whilst you are sick or injured and cannot work. .
Types of life insurances that provide monthly payments include:
Income protection cover - if you can’t work for an extended period due to sickness or injury. Payment could help support day to day living costs.
Mortgage protection cover - which is like income protection but aimed more specifically to help cover monthly mortgage or rent repayments.
Survivor’s income cover - provides income to those you leave behind after dying. This could help provide some financial support to family who you may have supported with your income.
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