| Term Assurance is taken for a set period and
only pays out the sum assured if death occurs within this
period. There are no other values apart from the death value.
There are many variations of term assurance, the main ones
being: |
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Level Term - the Sum
Assured is paid out as a lump sum on death - there is no
variation in the lump sum and premiums also usually remain
level. |
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Convertible Term - is
exactly the same as level term except that the policy may
converted at any time to a Whole Life or Endowment Policy. The
benefit being that there are no further medical details
required and that the period of assurance may be
extended. |
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|
Renewable Term - this
is a variation of convertible tern in so much as the life
company offer options to extend the term of assurance by set
amounts. |
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Decreasing Term
Assurance - the most popular form of this
cover is commonly referred to as a Mortgage Protection
Policy. This is where the cover declines to match the reducing
balance of a normal repayment mortgage. Or there is "straight
line" decreasing cover to match known future liabilities such as
short term loans. |
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Family Income Benefit
(FIB) - this is a form of decreasing term assurance
that pays out by way of an annual income instead of a lump
sum. |
| Whole of Life
Assurance pays out whenever death occurs. Premiums
are payable for life or to a certain age e.g. 80 dependent on
the contact and the company. It is the only protection policy
that may attain a cash value other than the sum assured. It is
also the only long term solution to meeting death liabilities,
in particular those associated with inheritance tax. There are
two main types: |
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Whole Life - maximum
cover - This provides the most cover for the least
outlay but premiums are subject to review at regular intervals
to ensure that premiums are sufficient to meet the cost of
providing the life cover. If they are not, premiums may have
to increase to meet any shortfall in funding. |
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Whole Life - balanced
cover - The premiums are higher but are set at a
level where the issuing office would consider it highly
unlikely that upon review, an increase in premium levels would
be required to maintain the Sum
Assured. |
