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Provides a lump sum on death.
Many policies will now provide this lump sum on the
diagnosis of a terminal illness.
Advisers recommend a lump sum of about 10 times a
salary for family protection.
The minimum type of protection for a mortgage or
similar large commitment.
This type of policy will benefit
your family or estate upon your death. It takes many forms but in
it's most basic format - called term insurance -it pays a lump sum
on death. You may already have some form of similar cover, e.g. for
your mortgage.
You are covered for as long as you
pay the monthly premium. Your premiums are not invested - if you
survive beyond the payment term (say, 10 or 20 years) you receive no
money back.
The absence of any
cash-in value is what generally makes term insurance the cheapest
form of insurance cover.
If you cease to pay the premiums the policy lapses and
your protection will end. Generally speaking, the higher the lump sum payable on death,
the higher the premiums, although a number of other factors will
influence the cost of cover including your age and sex, the term of the policy,
your general health and whether
or not you are a smoker.
Advisers recommend a lump sum of
about 10 times your salary in order to produce a viable income for
your family, although cover can of course be arranged to protect a
specific requirement, such as an outstanding mortgage balance or
other debts.
There are a number of
different types of term life insurance policies with the most common
probably being:
Level Term – You are insured for the
same amount throughout the agreed term of the policy. For
example, if you take out a 15 year term insurance policy with a sum
assured of £250,000, that amount will be paid on death at any time
over the 15 year term.
Decreasing Term – The sum insured
reduces by a fixed amount each year, decreasing to nil at the end of
the term. You would typically take out this type of policy to
cover the liability of a repayment mortgage, where the amount owed
to the mortgage lender decreases over the mortgage term.
Although the amount of cover reduces over the term, the premium
paid is normally fixed to stay the same throughout
the term.
A number of investment policies may also incorporate some life cover. If you are unsure
about which type of policy is best for you should always seek advice.
The costs of Term
Insurance have fallen markedly over the early part of 2006, and it
could be that you are paying for a policy that isn't really
competitive in the current market.
If you have taken out Term
Insurance in the last few years, particularly if you have a policy
with your mortgage provider, you might be surprised to see how much
you could save every month by rebroking your policy.
To get a term insurance
quotation use our
online life insurance quote request form.
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