Term Life Assurance
What is life insurance
Most people who are married or have any dependents would be horrified by the idea his untimely death, leaving his family with strong bills to pay, a struggle to meet mortgage or a sudden drop in their standard of living. Life insurance – which affords an advantage agreed lump sum if the policyholder death – is designed to take the sting out of just such concerns.
You probably realize this type of insurance described as a guarantee of life insurance or life and may have wondered why. The reason for the distinction – which these days is often blurred – arises from the fact that insurance is the risk of something happening. Death, however, is the certainty that we can all count as happens at some point. Insurance of life, description, therefore, was coined by the agreement under which a life insurance company agreed to pay out a sum assured on the death of policyholder.
To add a bit of confusion over the table, most life insurance policies sold today takes the form of guarantees term life. With term life assurance, the cover extends over a predetermined number of years and if the policyholder dies within this period, guaranteed total amount actually paid. If the insured survives the term agreed, however, then no benefit is paid. One could argue that the agreement is made a life insurance because the risk is being taken or not the policyholder will die within the period of insurance. Purists might argue, therefore, the label "life insurance" should be reserved for something called the whole of life assurance pays a lump sum to beneficiaries of the insured in any time death occurs.
Suffice it to say that the life insurance and life insurance terms are in common use, virtually interchangeable. As noted, all-of the security of life almost always pay, so their premiums tend to be somewhat higher than the standard warranty term life. Whole life insurance is also usually packed with an investment plan designed to improve the final payment, and this also increases the price of premiums.
Standard Warranty Term life, however, is still very cheap. In fact, one of the few products in any market that has actually dropped in price over the last decade. The level of benefits due under a life insurance policy term is directly proportional to the level of premiums paid, so much a question choice as to how much protection is purchased. It also comes in a number of different types to suit a variety of circumstances.
The most popular variation is the level term life assurance. Called level term, because the sum assured benefit remains the same throughout the term insurance. The decline in term life assurance, however, and as only the name suggests, offers a death benefit decreases over the course of the term. With a dwindling amount at risk, the life insurance company can charge a lower premium, even making it the ideal choice for someone you want to ensure that a standard repayment mortgage (where the balance is decreasing) is fully paid in the event of his death. For those who want to build in a degree of benefit increasing, or there is increasing term life assurance (with lump sum payment default by increasing annual increments) or Term life assurance indexing (increases benefits to pay depending on where inflation).
About the Author
David Thomson is Chief Executive of BestDealInsurance an independent specialist broker dedicated to providing their clients with the best deal on their
life insurance
, critical illness cover and home and motor insurance.
