Term Life Insurance

Term life insurance is the cheapest, most basic form of life insurance.

It covers you for a fixed period and pays out a one off lump sum if you die during the policy term.

With some term insurance policies you can add on additional options, like critical illness cover. If you do add on critical illness cover, the plan will pay out once on diagnosis of a qualifying critical illness or if you die during the term of the policy.

Term Life Insurance Pros and Cons

Pros

• If you want to leave a cash sum to your family, dependants or to pay off a mortgage after you have died, term insurance could be right for you.
• Term life insurance is one of the most affordable type of life insurance.

 

Cons

• More expensive than Decreasing term insurance for mortgage protection.
• The policy only pays out if you die or are diagnosed with a qualifying critical illness, if you add on critical illness cover, during the term of the plan. If you survive beyond the end of the term the policy has no maturity value.

 

Term Life Insurance Explained

Term life insurance pays a lump sum in the event of death within a specified period of your choice (known as the 'term'). Premiums are normally paid monthly though some policies allow annual pay.

There is no investment element with this form of life insurance, as such if no claim has been made there is no maturity value payable at the end of the term.

Term life insurance is the cheapest and simplest form of life insurance. You are covered for as long as you pay the monthly premiums. If you stop paying the premiums, the policy stops.

Different types of term life insurance are available:

Level Term assurance

• lump sum is payable on the event of death. This lump sum remains constant throughout the period of the life insurance term.

Decreasing Term Life Insurance

• a lump sum is payable on the event of death. This lump sum decreases by a fixed amount during the period of the term, decreasing to nil by the end of the insured period. This form of cover is usually used for mortgages or other loans where the amount owed decreases year on year.

Family Income Benefit

• This type of cover, gives your loved ones a regular income not a lump sum. But the income is only paid for the term of the policy, so the nearer the end of the policy you die, the fewer years it pays out for.

Premiums will depend on the sum to be insured, the period of insurance cover, your age, your sex and whether you smoke or not. A non smoker is usually defined as someone who has not smoked for at least twelve months.

Additional options can be added to increase the level of cover, although this in turn increases the premiums.