Life Insurance

Level Term

Level term assurance pays out if you die or, as in the case with some policies, you are diagnosed as having a terminal illness during the term of the policy. If you live to the end of the term, the policy expires and no payment is made. Similarly, if you stop paying the premiums at any time, cover will cease. However, some policies may offer a waiver of premium option that allows the policy to remain in force under certain circumstances (disability etc.).

Decreasing Term Assurance

The lump sum payout on offer with decreasing term assurance, as you might guess, decreases in size over time. The advantage of the reducing life cover under this type of policy is that premiums are likely to be lower too. Decreasing term assurance is also described sometimes as mortgage protection insurance. It is commonly used to protect the repayment of a reducing debt - such as a repayment mortgage, a loan, school fees etc. Some policies may offer a waiver of premium option. If you live to the end of the term the policy expires and no payment is made. Similarly, if you stop paying the premiums at any time, cover will cease.

Convertible Term Assurance

The sum assured stays the same for the term of the policy. However, for an additional cost you will have an option to convert this original plan, or part of it, to another type of policy such as an increasing term assurance, a whole of life policy or an endowment, without further medical evidence being required. If you stop paying the premiums at any time, cover will cease.

Whole Life Insurance

This pays the sum insured whenever your death occurs. Whole life insurance is not limited to a specific period like term insurance. Premiums are usually more expensive because it is certain that the insurance company will eventually pay the sum insured. With some policies you will have to pay the premiums until you die, but with others you may not have to pay premiums any more once you reach a chosen age – say 65 or 80 - but the insurer will pay the sum insured when you die. In these cases the policy is then known as “paid up”. Whole life insurance can be arranged with or without profits or can be unit-linked (see life insurance investment page).

Death in Service Benefit

Death in service benefit is the name for cover, which can be provided by your employer. If you die while employed then it will typically pay between two and four times your salary, a useful boost to your own assurance arrangements. However, you should review your cover if your lifestyle changes or you move jobs.

Family Income Benefit

Family Income Benefit (FIB) provides a tax free regular income which is paid out for the remaining term of the policy if you die. FIB can provide a replacement income and may be index-linked to inflation, so that cover remains the same in real terms. If you live to the end of the term, the policy expires and no payment is made. Similarly, if you stop paying the premiums at any time, cover will cease.