There is a wide range of Life Insurance and Assurance policies available. This article explains what the most common ones are.
This is the simplest of all Life Insurance policies.
You agree to pay premiums for a fixed term (normally anywhere between 1 and 30 years), and in the event of the death of the life insured, the agreed amount of insurance is paid out.
This is the same as Term Insurance with the facility to convert the policy to another type of Life Insurance or Life Assurance policy up to the same level of insurance as the original policy. This facility allows you to make the conversion without the need to provide any medical evidence.
This is the same as Term Insurance with the facility to renew the policy at the end of the term up to the same level of insurance as the original policy. This facility allows you to make the conversion without the need to provide any medical evidence. The new premium will be higher because you are older than when you took out the original policy.
Convertible renewable term
This is a combination of both Convertible and Renewable Term insurance.
Reducing Term Insurance
This is similar to Term Insurance, however each year the amount of insurance will reduce on a sliding scale. The premium will remain the same during the whole term. This type of insurance is typically used to protect a mortgage.
Family Income Benefit
This type of policy is used to provide a fixed monthly amount that is paid for the remainder of the term of the policy to a specified person in the event of the insured person dying. Typically this is used where there are families who are financially dependent on the life insured.
Whole of life
The premiums are payable for the whole of the life of the insured person and in return there is a guaranteed payment on death. Frequently these policies are used to provide a sum of money to pay any Inheritance Tax due on the death of the life insured.
There are far fewer savings plans available than ten years ago, however those that are available combine a small amount of Life Assurance (typically 75% of the premiums payable over the term) with an investment element.
These plans can be used if there is a fixed objective in a fixed time in the future; however there are many more flexible regular savings schemes available that do not contain an insurance element.
There are very few endowment policies available. Those that are available combine Life Assurance and investment to pay out a minimum sum of money at the end of the term or in the event of death of the life insured.
This article is for guidance only and must not be construed as advice. The contents of this article are aimed at the UK market, although many countries will have similar policies available. If you need advice you should refer to a Financial Adviser.