Term Assurance
Term Assurance, often referred to as life insurance, is designed to provide cash either by lump sum or regular payments in the event of death during a specified period of time.
Term Assurance policies have no surrender value at any time. If no claim is made the policy will cease at the end of the term without value. The cost of this type of life insurance is lower than 'whole of life' policies for a given amount of cover. Term Assurance will normally be for a set term, at the end of which the family will be self-sufficient and not reliant on the person originally insured.
Additional benefits can be included such as critical illness cover and waiver of premium.
There are essentially 3 types of life insurance.
Level Term Assurance
This is where the amount of life insurance, or sum assured, remains level throughout the term of the policy. If you are taking out life insurance to protect your loved ones in the event of your death you will need to consider level term assurance to ensure that the level of protection remains constant. You will also need level term assurance if you have taken out an interest-only mortgage.
Decreasing Term Assurance
This type of life insurance is specifically designed to protect a capital repayment mortgage in the event of death and is often known as mortgage protection insurance. The sum assured decreases over the term of the policy roughly in line with your outstanding mortgage debt, although the premium will be determined at the outset and will normally remain the same throughout. Decreasing Term Assurance is usually cheaper than Level Term Assurance and with some insurers you will be able to select the interest rate on which the reducing cover will be based.
Occasionally if you have assigned your policy to a lender, conditions may not automatically allow you to benefit personally but may insist that the sum assured repay the debt.
The premium can be reviewable or guaranteed.
Indexed Term Assurance
Life insurance that allows for the sum assured to increase each year, normally without medical evidence and usually in line with the Retail Price Index (RPI) up to 10% in any one year, thus retaining its value in real terms.
Single or Joint Life
Policies can be taken out on either a single or joint-life basis. Single life insurance affords cover individually, whereas a joint-life plan will normally pay out on the first event only and then the policy ceases.
Decreasing Term Assurance
This type of life insurance is specifically designed to protect a capital repayment mortgage in the event of death and is often known as mortgage protection insurance. The sum assured decreases over the term of the policy roughly in line with your outstanding mortgage debt, although the premium will be determined at the outset and will normally remain the same throughout. Decreasing Term Assurance is usually cheaper than Level Term Assurance and with some insurers you will be able to select the interest rate on which the reducing cover will be based.
Occasionally if you have assigned your policy to a lender, conditions may not automatically allow you to benefit personally but may insist that the sum assured repay the debt.
The premium can be reviewable or guaranteed.
