As other Protection insurance, such as car and buildings insurance, are imposed by law, it is often easy to overlook the most important insurance available today. Cars and property can be replaced with a reasonable degree of affordability, however your life can’t. If you were to die or fall seriously ill tomorrow could your loved ones cope financially?
Term Asssurance is often the cheapest, and simplest, form of life insurance. An individual can insure their life for a set term, for example until a loan or mortgage is repaid, and guaranteed monthly premiums can be agreed at outset of the policy. These policies will not contain any element of investment and simply agree to pay out on death within the term, providing premiums are paid and full medical disclosure had been submitted. However, should the policy term end prior to death, no premiums are returned and no benefits are paid.
Term policies can either be level or decreasing. A level policy simply means that the sum assured remains level throughout the term of the policy and therefore, should death occur one year in to the policy, the same sum should be paid as were death to occur in the final year of the policy. A decreasing policy on the other hand will pay out more at the beginning of the policy than it would at the end. These policies are therefore generally used when cover is taken out for a specific loan, mortgage or other purpose.
A term policy can pay the beneficiary in one of two ways. Generally, a tax free lump sum will be paid on death, however, in the case of family income benefit policies, a tax free income can be paid to the end of the term. As usual there are pros and cons to both and therefore advice should be sought prior to a decision being made.