There are so many different types of life insurance such as level term insurance, decreasing term insurance, whole of life insurance and some others.
Below is some basic information about the first three mentioned above:
LEVEL TERM INSURANCE
Level Term Insurance is a form of life cover taken out usually for a specific sum over a set number of years with the premium remaining constant throughout the term of the policy. It is often taken out either on a sole life basis or on a joint life first death basis. It is usually taken out for family protection purposes to provide life cover in the event of the death of say the husband or wife so that there are sufficient monies available to the survivor to help support them financially to look after themselves and any dependent children. Level Term Insurance is sometimes taken out to cover liabilities such as loans, mortgages and overdrafts so that in the event of the death of the life assured the liability is cleared so the survivor is not burdened with the repayments. Critical Illness cover can sometimes be included so that the policy pays out upon diagnosis of a specific critical illness such as a heart attack, stroke or cancer. Should the life assured be still alive at the end of the policy term or not have suffered a critical illness the policy normally finishes and nothing is payable.
DECREASING TERM INSURANCE
Decreasing Term Insurance is a form of life cover usually taken out to provide life cover to repay a loan or mortgage in the event of the death of the life assured over a specific term so that the survivor is not burdened with the repayments. The level of life cover reduces during the term of the policy usually in line approximately with the amount of say the mortgage. The premium remains constant during the term of the decreasing term assurance policy but reflects the fact that the level of cover is reducing i.e. it is cheaper than Level Term Insurance for the same amount of cover and term. Critical Illness cover can often be included.
WHOLE OF LIFE INSURANCE
Whole Of Life Insurance is usually more expensive than Level or Decreasing Term Insurance because as long as you are prepared to pay the premium requested by the insurance company the policy will always pay out in the event of the death of the life assured. Whole of Life Insurance is often taken out for family protection purposes to provide a lump sum to the survivor in the event of the death of the life assured to make life more comfortable for the survivor and their children. This type of cover often has various options with it such as the ability to have the level of cover and premiums increase automatically each year. The premium is usually invested in a fund and the cost of providing the cover is taken out of the fund. You can elect to pay more into the fund in the hope that when the level of cover and premium is reviewed after say ten years there is sufficient monies left in the fund so that the premium does not need to increase for a further agreed period. Critical Illness cover can often be included in a Whole of Life policy. This type of cover is more flexible than Level Term Insurance or Decreasing Term Insurance.
The above gives a basic overview of these types of life insurance. You should contact a suitably authorised person for specific advice as to the most suitable type of life insurance.
Alan Hope runs a lifestyle management and concierge service business for both UK and Overseas clients.
Visit his website at http://www.insuranceplan.org.uk/index.html
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