If you are considering buying life insurance, there are two primary types of policies: term life and whole life insurance. In this article, we will focus on term life insurance, which is designed to pay out if you pass away during the policy’s lifetime. The term is the length of time for which the policy runs, and it is defined by you and your insurer.
Term life insurance policies are generally cheaper than whole life policies, and there are different types of term policies available for specific purposes.:
|Type of Policy||Description|
|Decreasing term life cover||Pays off an outstanding debt, such as a repayment mortgage. The cover amount decreases as the outstanding balance of the mortgage reduces.|
|Level term||Offers a fixed cash lump sum payable upon the policy holder’s death. It can be used to pay off debts, leave a legacy, or help loved ones cope with various financial considerations.|
|Increasing cover||Reduces the impact of inflation on the money left behind for loved ones. The cash sum paid out increases annually in line with the retail price index, up to a maximum of 10%.|
Term life insurance policies are generally more affordable than whole life policies because they only function as insurance and do not include a cash value or savings account that can be borrowed against. When purchasing a term life insurance policy, factors such as your age, health, and lifestyle habits will be considered to assess your level of risk. Smokers and those with pre-existing medical conditions may have higher premiums, and individuals in certain professions may not be eligible for coverage.
Overall, term life insurance is designed to provide a payout to your loved ones if you pass away during the policy’s lifetime. It is important to assess your financial situation and consider the ongoing cost of living that will continue after you are gone. If you find that your loved ones’ ability to finance their lives would change dramatically without your income, purchasing a term life insurance policy may become a serious consideration.