We understand you may have lots of questions about your protection requirements. If you would like to chat further with one of our advisers, please get in touch.
Term life insurance
This is a life cover policy that runs for a specified amount of time, or 'term', for example – 30 years. This type of insurance policy is often taken out to cover a loan, such as a mortgage, or to cover an ongoing financial commitment, such as raising children.
There are three different kinds of term life insurance policy;
1. Decreasing term
2. Level term
3. Increasing term
Decreasing Term Life Insurance
Decreasing term insurance is designed to help your loved ones pay off your financial commitments such as a repayment mortgage should you pass away during the term of the policy. With a decreasing term policy, the amount of cover decreases each year for the length of the policy eventually finishing at £0. This is usually in line with an outstanding debt you want to pay off, such as your mortgage. Your monthly premium payment remains the same for the duration. The interest rate on your mortgage will also affect your insurance so it’s important to ensure your protection adviser has taken this into consideration.
Level Term Insurance
A level term life insurance is a type of insurance policy that pays out a cash sum if you die during the term of your policy. The amount paid out is the same whether you’re near the start or end of your policy and the monthly premiums stay the same throughout the term unless you make any changes. Level term policies are often taken out to prevent disruption to their loved ones’ lives should the policy holder die.
If you survive the policy term, you and your family won’t receive anything.
Level term policies don’t take inflation into account, so it’s important to remember that when you take out the policy, the cash pay-out amount may seem more than adequate, however, 15-20 years later, this may not be the case.
Increasing Term Insurance
With an increasing term insurance policy, the amount of cover increases each year, by a fixed amount throughout the term of the policy. This type of policy is often chosen to protect the value of the policy against inflation. An increasing term life policy takes changes to inflation into account, meaning that the amount of a potential payout rises alongside the inflation rate. Due to the fact this type of policy potentially offers the largest payout of term policies, it is likely that the monthly premiums will be higher than those for decreasing and level term policies. Increasing term cover premiums may also increase periodically.
What is the right amount of cover for me?
This depends on individual circumstances and personal priorities. The three main things to consider are:
1. What do you need to protect?
2. How much cover do you need?
3. How long do you need the cover for?
Our specialist protection advisers can spend the time talking you through the range of options and answering any questions you may have.