Types of term assurance

There are various types of term assurance and you should consider the different options carefully before deciding which type of product is for you.

Level term assurance- 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

eg: You insure your life for £100,000 and your estate will receive £100,000 if you die within the term of the contract.

Convertible term assurance - is exactly the same as level term except that the policy may converted at any time to a whole life policy. The benefit being that there are no further medical details required and that the period of cover could be extended. We will explain the whole life policy later in this guide.

Renewable term assurance - this is a variation of convertible term in so much as the provider offer flexibility to extend and change the original policy.

Decreasing term assurance this is where the amount payable on death decreases over the life of the policy. 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.

Increasing term assurance - you increase the amount of death payment at set times or whenever you choose to accommodate any changes in your circumstances such as the new baby.

Family income benefit - this is a form of decreasing term assurance that pays out by way of an annual income instead of a lump sum.

Pension term assurance - many providers offer the option to take term assurance as part of a personal pension scheme. The benefit for those who are not already members of an occupational pension scheme is that the premium may attract tax relief.