Term Life Insurance Guide

Low cost protection for you and your dependants...

Term life insurance is the cheapest form of life cover.

For just a few pounds a month your dependants can be covered for several thousand pounds providing you with financial protection if you die within a specified period known as "the term". This period might be 10, 15, 20 years or more, although you can arrange policies to cover you for periods as short as one month.

Term life insurance has no investment element, so if you are alive at the end of the term you will receive nothing back.

TYPES OF TERM LIFE INSURANCE

• Level Term Life Insurance - The benefit amount remains level throughout the plan term and is the most common type of cover.
• Decreasing Term Life Insurance - The benefit amount  reduces by a fixed amount each year, decreasing to nil at the end of the term.  These policies are usually used to cover a mortgage or other loan and they pay any outstanding repayment if you die early.
• Family Income Benefit - If you die during the term of the policy a regular income is paid to your dependants for the rest of the term. The income can be paid monthly, quarterly or yearly.
• Convertible  Term Life Insurance - You can convert the policy to a whole life or endowment insurance without giving further evidence of your health. If you decide to convert, the new policy will usually cost the same as a normal whole life or endowment policy based on your age at the date when you exercise the option.

BUYING TIPS

1. Check that the policy has terminal illness benefit included. This is a valuable extra which will pay the life insurance amount early if you suffer a terminal illness, allowing you to make arrangements for your dependants while you are still alive.
2. Can the policy be set up in trust? This will avoid any delay in the money going to your dependants and the risk of inheritance tax being charged on the benefit.
3. Can waiver of premium benefit be included in your plan.  This is a valuable extra which, if  you become too ill to work for a number of months, will ensure your cover continues without you having to pay the premiums.
4. A valuable feature of some policies is counselling for your family if you die?
5. Check that the premiums are `Guaranteed´.  This means the premiums are guaranteed to remain the same throughout the term of your policy.  This is opposed to `Reviewable´ premiums which, as the name suggests, are reviewed usually every 5 years and can increase dramatically.
6. If you are looking for term insurance and critical illness, you can make big savings by buying a combined policy. These only pay out one lump sum rather than the two that separate policies would pay, if you suffer a critical illness and then die.

THE  COST
The cost will depend on a number of factors, the most important being your age, sex, lifestyle, if you smoke and your general health. Women pay less than men because, on average, they live longer.

POLICY OPTIONS
You can include one or more options to improve the level of  protection provided by your policy. Adding any of these options will increase the premiums.

• Waiver of  Premium - if you are unable to work due to illness or injury, your insurance company will continue to pay your premiums and keep your cover in force.
• Critical Illness Cover - the insurance benefit will be paid if you are diagnosed as having a  critical illness covered under the policy.
• Indexation - your cover and premiums increase each year to stop inflation eroding the real value of our cover over time.