Life Insurance Guides and Common Terms
Life insurance may sound complicated and our brief guide below may help you understand some of the terms used a little better however please remember that our trained staff are always on hand to explain anything and to guide you where needed. They are employed to find the right policy to suit your needs so if you are looking for help with your Life insurance please contact us today.
Life Insurance which is sometimes also known as life assurance and life cover is a insurance contract between a policy holder which will normally be yourself or possibly yourself and your partner and an insurance company. The insurance is designed to pay a sum of money upon the death or where specified the diagnosis of critical illness of the insured person or persons. In return for this life insurance cover the policy holder agrees to pay a pre arranged sum to the insurer normally in the form of a monthly insurance premium payment.
Term Life Insurance
Term life insurance is designed to cover a specific period of time rather than the whole of a persons life. This means that an insurance policy may be taken to cover a set term, for example 20 years and the insurance will only pay out if the insured dies within this period. When the term ends it is up to the insured to renew or extend the policy if they wish to continue to be insured.
There are different types of term insurance.
Level term Insurance
This will pay out a fixed prearranged sum of money when the policy holder dies. The amount paid to the persons relatives remains fixed during the term of the policy and does not decrease in value.
Decreasing Term insurance.
This will pay out a sum which gradually decreases during the term of the policy. This will normally be used to cover financial commitments which will shrink during the duration of the policy. For example – a repayment mortgage will gradually be paid off and your debt will decrease over a 25 year term. If you need a life insurance policy to cover this mortgage following your death a decreasing term policy will decrease in line with your mortgage repayments.
Increasing Term Insurance
This is designed to combat inflation. The amount paid on death will grow with inflation to give your family an amount that grows in value over time.
Whole Life Insurance
Whole Life Insurance is designed to pay a guaranteed sum in the event of your death. This is paid to your dependants/family. In some cases it will also pay on the diagnosis of a critical illness. These are sometimes called straight life insurance or permanent life insurance policies as the cover your whole life term rather than just a pre-arranged period during your life.