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Thanks to incredible advances in healthcare and a higher standard of living, we have every chance of living a long happy and healthy life if we take care of ourselves. But that said, none of us will be around forever. And when we pass on we all want to do so knowing that those we care about the most will be looked after in our absence. A life insurance policy is essential to protect your assets and your loved ones when you should pass on, so that their finances are not decimated by your loss and associated costs like funeral expenses.
Still, not all life insurance policies are created equal and it’s essential to do your research to determine the best kind of cover for your needs. At Discount Life Cover, we take the hard work out of this for you, providing an “advised sale” which reassures you that you’re choosing the right cover for your needs. That said, it’s definitely worth taking the time to educate yourself on all the different types of cover that are available.
Here we’ll take a close look at Term Life Insurance...
What is Term Life Insurance?
Term life insurance provides a cash lump sum for a policy holder’s loved ones if they die within a set time period (or term). When taking out a term life insurance policy, your cover may not exceed the specified amount of time. So for example if you should take out a 30-year term, and die within the 30 years of the policy being taken out, your family and loved ones will receive a cash lump sum payout from your insurer. If you should die when the term expires, you will not be covered.
How long of a term you choose is completely up to you. Terms range from as little as 5 years to as much as 70 years. However, the longer the term of cover, the higher your premiums are likely to be.
Whats is Level Term Life Insurance?
Level term life insurance is where the sum assured (amount of cover) stays at the same level throughout the term of the policy. Its the opposite to a decreasing term life insurance where the amount of cover decreases over the term. Level term life insurance is often used to cover a mortgage loan which is on an interest only basis. Where as decreasing term would be to cover a repayment mortgage.
The advantages of level term life insurance is that you always know how much cover you have. No matter when you make a claim, the amount of benefit received will be the same. The disadvantage of level term life insurance is that its more expensive.
What does Term Life Insurance Cover?
Because Term Life Insurance provides a cash lump sum payment to your surviving family in the event of your death, what it covers is completely up to them. However, it is typically used to cover;
- Your household’s mortgage repayments
- Household bills and day-to-day expenses
- School or university tuition fees
- Paying off any outstanding debts
- Increased childcare provision
- Anything else that can make your loved ones’ lives easier when you’re no longer there.
Who is Term Life Insurance best suited for?
There are lots of different kinds of people who benefit from Term Life Insurance. It is primarily suited to working parents- those who have spouses, partners or children who are dependent on them and who will struggle financially without you, particularly if you own a property together. It is designed to fill the void left without your income and to help those you care about pay off the mortgage and manage their household bills.
However, if you’re a stay at home parent you may also benefit from Term Life Insurance as, without you, your spouse would need to make arrangements for childcare etc. which could place a significant strain on their personal finances.
Can you get Term Life Insurance jointly with a spouse or partner?
Yes, you absolutely can. You have a choice of being able to take out an individual policy on your own or to take out a joint policy with your partner.
However, joint policies work a little bit differently. Although two lives are covered by the policy, the couple only gets one payout between them. This is usually after the first partner dies. Since there is only going to be one payout, the premiums are usually a little cheaper when compared to each partner buying their own individual policy.
While most people who apply for joint policies are couples, they are not exclusively available to people who are living together or in a relationship. Sometimes, business partners decide to take them out together too.
While there are benefits to joint policies, there are also caveats, too. For instance, if your relationship ends, it is not possible to divide your cover into separate policies. This is not a problem for partners who each have their own cover. Moreover, if both partners should die at the same time, there is still only one payout.
After the first partner dies, the surviving partner no longer has life insurance cover, and arranging cover may be more expensive, especially if you are significantly over or your health is in decline.
What are Increasing and Decreasing Term life insurance?
There are three kinds of Term Life Insurance- Increasing, Decreasing life insurance and Level Term. We’ll get to Level Term shortly, but first let’s take a look at Increasing and Decreasing Terms.
Increasing Term insurance is designed to help combat inflation and the rising cost of living. As such, the size of the payout increases as the term of your policy continues. The further into the term you pass away, the bigger the payout your family will receive.
Cover can be set to increase by a set amount each year or in line with inclination according to the Retail Prices Index (RPI). Naturally, this means that your premiums will increase as your cover rises.
On the other hand Decreasing Term policies are designed for those who want more disposable income and have fewer debts (e.g. mortgage debts) to pay as they get older. If, for instance you took out a £100,000 decreasing term insurance policy 40 years and you passed away half way through the term, your family would receive around £50,000.
This tends to be the most affordable form of Term Life Insurance.
What is Level Term Life Insurance?
Finally, we have Level Term Life Insurance. This ensures that the payout for your loved ones remains the same at whatever point in the policy’s length you die. So, if you take out a 30 year policy for a £100,000 payout, your family will get the same amount whether you die in year 1 or year 29 of that policy. For more information on life insurance why not check out our ultimate guide to life insurance blog post.
What are Increasing and Decreasing Term life insurance?
Not only do we work tirelessly to provide the perfect life insurance cover for you, we also make sure we provide great cover at the best prices. Because we’re an online company we have fewer overheads and are able to pass the savings on to you. But don’t take our word for it. Click Here to get a quote and see for yourself!
Discount Life Insurance…Why Use Us
We are an online advice service and as such have little overheads which enables us to give away more commission enabling us to me extremely competitive on price.
Having said all this, life insurance is not always about price and there are differences in the types of cover offered by providers. So we also provide an “advised sale” which means that we take on responsibility to make sure the policy you take is the right one and the most suitable for your circumstances.