Term insurance: how much will be paid out on your death?
Searching for a term insurance policy should be simple. Only three things really matter: the size of the premiums, the amount covered, and the name of the beneficiary. Yet many people focus on the first and last item at the expense of the middle one – which can lead to a nasty shock in the unfortunate event of a claim.
Can we save you money on your life insurance or critical illness?
|
|
 |
 |
Term insurance is a form of life insurance offered over a fixed length of time – 10, 20, 25 or 30 years. You pay a premium each month, and on your death your beneficiary gets a cash lump sum. It provides a good way of ensuring your beneficiary, if you die, will be able to cope financially with something that has a defined end – like the paying-off of a mortgage or funding of a child’s education.
The cost of term insurance has fallen significantly over recent years. A 50-year-old is now more likely to live through a 30-year term than otherwise – and that is reflected in the price of premiums.
But choosing the wrong type of policy means you can still overpay for cover – or, alternatively, find your family under-funded in the event of your death.
Expecting £500,000 to have the same buying power in 15 years that it has today could be a mistake, for example. Similarly, you could pay over the odds for £250,000-worth of cover against a mortgage that might only have half that outstanding in 15 years’ time.
The key types of term insurance available, with a brief explanation of each, are:
- Escalating term insurance: the amount paid out at death goes up over time – as does the premium. This can be a good way of automatically covering yourself for assumed rises in your salary, your way of life and the cost of living during the term of the policy.
- Increasing term insurance: you increase the amount to be paid out on your death as needed – such as when you have a child or move to a larger house. Again, your premiums go up as the cover increases.
- Decreasing term insurance: the monthly payments stay the same, but the amount of cover goes down each year. This is often suitable alongside a repayment mortgage, where the amount needed to clear the loan goes down during the course of the term.
- Convertible term insurance: often used as a lead into an investment-based insurance policy. Some people dispute whether life insurance has a place as part of an investment vehicle (and vice-versa), and speaking to an independent expert before signing up to such a policy might be a good idea.
- Level term insurance: the simplest form of term insurance, where the amount paid out by the insurer remains the same throughout the length of the policy.
If you are unsure about which policy is right for you, it may help to talk to an expert.
Jump Money is a specialist in critical illness and life insurance cover and is happy to answer any questions you may have related to life insurance, life insurance, term insurance and life cover. The company will strive to fit an insurance package to the exact criteria you need in order to help you avoid buying products you do not need as well as helping you fully understand your purchase.
To find out more about how Jump Money can help you protect yourself and your belongings call now on 0845 8516262 or fill in an online quote form today.
Return to Jump Life Insurance articles index
Get a free online Life Insurance quote | Get a free online Critical Illness quote | Get a free online Mortgage Protection quote | Get a free online Income Protection quote | Return to the home page