Term Assurance— Life Cover

Term Assurance

What is it?

Term Assurance provides a lump sum on the event of premature death within a specified term that can be applied in a number of ways.  In some cases an additional critical illness benefit can be added whereby a lump sum is paid upon diagnosis of a serious health condition such as heart attack, stroke or cancer.  It may also be possible to take this benefit as a stand-alone contract.

Who is it for?

This type of assurance is appropriate where a lump sum is required upon the premature death/critical illness of the person covered.  The lump sum can be then used in a number of ways:

• When invested can provide long term security for beneficiaries or dependant
• Can be used to repay a debt
• Can be used as part of a business protection strategy
• Can be used to pay an Inheritance Tax liability

How does it work?

The options with Term Assurance are:

• Level Cover
  Under this plan the sum assured remains the same for the duration of the contract.
• Increasing Cover
  Indexing your sum assured allows you to maintain the real value of your life assurance protection as it increases automatically each year regardless of your state of health at that time.  Your contribution will increase each year to reflect the increased sum assured.  If the sum assured is increasing by 5% the premium will increase by more than 5% to cover not only the increase in benefit but also the fact that you are one year older.
• Convertible Cover
  Under this plan the sum assured remains the same for the duration of the contract.  An extra payment is made to allow the policy holder an option to convert the original policy (or part of it) to another type of policy, increasing term assurance, whole of life or endowment, without further medical evidence being required.
• Decreasing Cover
  Under this plan the sum assured is specified at the outset of the contract and decreases throughout its term.
• Mortgage Protection
  Under this plan the sum assured is specified at the outset of the contract and cover decreases throughout the policy term.  The decrease in sum assured will be broadly in line with the reducing mortgage debt.
• Reviewable Cover
  Under this plan the sum assured remains the same for the duration of the contract.  Premiums are kept to a minimum as it is you rather than the insurance company who are shouldering the risk of changes in mortality experience.  The insurer has the right to review premiums based on claims history, which could mean premiums increase significantly at a review.
• Renewable Cover
  Under this plan the sum assured remains the same for the duration of the contract.  For a higher premium you acquire the option of extending the original term of the policy without having to provide medical evidence.
• Family Income Benefit
  This type of policy undertakes to pay upon death of the policy holder a regular lump sum for the term remaining on the policy at the date of death.