There are different types of life assurance policies available. Shop around and compare policies to ensure that you receive the best deal possible. This sounds obvious, however, there are dozens of different types of life cover plans available and it is important that you select the right one for your circumstances.
Life assurance is assurance that provides protection against the economic loss caused by the death of the person insured. There are several types of Life assurance, each having different characteristics. Some of the key types of Life assurance are: Term Life, Whole Life, Burial assurance, Survivorship Life, Universal Life, and Variable Life assurance. Outlined below is a useful description of each type:
Term Life assurance
Term Life assurance is the lowest cost and simplest product available. Term assurance is a life assurance contract that provides protection for a limited number of years. The death benefit is only payable if death occurs during the agreed-upon term. There are various types of Term assurance Life Policies:
Level Term Life assurance
means that your premiums are set at a level at the beginning of the contract and do not move up or down. The sum assured will remain the same throughout the term.
Increasing term assurance
This is a fixed term policy where the sum assured will increase, either by a set percentage or by the Retail price index (RPI) throughout the policy term. Your premiums remain level throughout the term if the sum assured rises by a set percentage, or will rise according to the RPI if the sum assured does the same.
Renewable term assurance
This is policy lasting for a smaller period, usually five years, which can be renewed, although the sum assured cannot be increased, whilst the premiums will increase with age.
Renewable increasable term assurance
is the same as above but provides for an increasing sum assured.
Convertible term assurance
provides the option to convert parts of the sum assured to whole of life, endowment or further term assurance without further medical evidence.
Decreasing term assurance
is where the sum assured decreases over time; hence, the premiums are set lower. This is commonly used to cover a mortgage.
Whole Life assurance
Life assurance that remains in force during the insured's entire lifetime, provided premiums are paid as specified in the policy. Whole life assurance also builds a savings element (called the cash value) as a result of the level premium approach to funding the death benefit.
Burial assurance
Burial assurance, or Final Expense Life assurance, is essentially a whole life product with small face values. The application process is simple and does not have the associated medical requirements of other policy types. This type of life assurance is also referred to as a simplified issue or guaranteed issue policy.
Survivorship Life assurance
A type of whole life assurance which insures two people and pays benefits only after the second person dies. It is generally designed to provide funds to pay estate taxes.
Universal Life assurance
An unbundled whole life assurance product in which the mortality, investment, and expense factors used to calculate premium rates and cash values are expressed separately in the policy. In a universal life assurance policy, any applicable expense charges are deducted from the premium and the remainder of the premium is then credited to the policy's cash value. Each month the insurer deducts the mortality costs from the cash value and credits the remainder of the cash value with interest.
Variable Life assurance
A form of whole life assurance under which the death benefit and the cash value of the policy fluctuate according to the investment performance of a separate account fund. Most variable life assurance policies guarantee that the death benefit will not fall below a specified minimum. A minimum cash value is seldom guaranteed.
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About the Author
John Mussi is the founder of Direct Online Loans who help UK homeowners find the best available loans via the www.directonlineloans.co.uk website.