Understand Term Life Assurance
Life can throw some unexpected curve balls and things can change in a hurry. Statistics show us that danger lurks around every corner and there is no way to make ourselves immune to the chaos it might bring. Unfortunately, many people remain in a constant state of anxiety over the responsibilities of handling family, kids, work and, of course, the uncertainties of life-altering events.
When the financial well-being of your family is at stake, term lifeassurance offers the ability to remove the financial anxieties that are often faced when there is a death. While life will remain hectic, knowing that your family is protected can provide the peace-of-mind you need.
Term Life Assurance — What Is It?
This is a type of insurance that provides a payout if you should die during the specified period. The period specified in the policy is known as your term of coverage.
This type of policy will generally provide a lump sum payment upon death of the insured. The amount of the payment will depend on whether you have level or decreasing coverage.
Level vs. Decreasing Insurance Coverage
Level cover is fairly straightforward. When you choose this type of coverage, you simply decide on the amount of coverage you want and it will remain constant throughout the life of your plan.
For example, if you want to make sure you have £150,000 in insurance at the time of your death; no problem. All you have to do is make sure that you sign up for a policy that specifies this amount of coverage.
You will be required to pay a set monthly premium in exchange for a guarantee that your estate will be paid £150,000 upon your death if you should die during the policy term. A policy with decreasing cover is not quite the same.
With this type of policy, payments are not a fixed amount; instead, the payments decrease throughout the term of the policy. Decreasing term plans are typically tied to a mortgage and the coverage goes down as your loan balance decreases.
For example, if you have a mortgage with a £100,000 outstanding balance when you take out your decreasing term policy and you have £1,000 monthly payments, every month the coverage amount of your decreasing term policy will go down by £1,000, just like your mortgage balance decreases by this amount.
Basically, your cover will decrease over time in order to coincide with the amount needed to pay your mortgage off. A decreasing plan will generally be less expensive than a level plan because over time, you will require less coverage.
Why Choose A Term Plan?
Things can happen at any time and it only makes sense to make sure that you have the coverage your loved ones will need. Term life insurance offers an excellent opportunity to provide your family with the financial stability they will need if faced with the loss of your life.
It only takes a minimal investment to ensure financial security, after all, monthly premiums can be very affordable and often come with the potential for a large lump sum payment when it is most needed. Making sure that you are able to provide for your family’s financial well-being is crucial. Of course, it is even more advantageous if you can provide this peace of mind at an extremely affordable rate.
Term life insurance offers an important way to offset the high costs of a funeral even for families who are not worried about the financial aspects of moving on after the death of a loved one. Funeral expenses, legal fees and of course, the wages lost due to grieving, can all be better handled with an insurance payment.
How Does the Process Work?
There are 3 basic elements to a term plan:
- The length of time or term that is covered
- The policy’s face amount
- The cost of the insurance plan or its premium
If your insurance provider agrees, you can typically pick any term that works for you. Common lengths for a level term plan is often in multiples of 5. For example, 5 years, 10, 15, 20 years and so forth. Term lengths for plans that are decreasing will depend on how long there is a mortgage balance.
Face amounts can also be chosen up to the limit offered by your provider. Many providers have a set limit to the amount of cover they will offer. The cost for your particular plan will be dependent on how much cover you choose; a lower face amount will cost less than a higher face amount.
It is somewhat possible to control how much you pay in premiums; however, it is primarily determined by the amount of risk your provider associates with the policy. Depending on the particular insurance provider, you might have the option of choosing between guaranteed and reviewable premiums.
A guaranteed premium will remain the same throughout the duration of your policy. A reviewable premium can change at intervals according to the risk that is assessed by your provider. Clearly, your insurance premiums will increase as you get older. Many people choose a reviewable plan when they are young because the premiums are considerably lower for younger individuals.
Can A Term Life Policy Be Renewed?
Depending on your provider, your term life plan might be renewable. Some providers will offer a guarantee of renewal while others maintain the right to not continue coverage. There are also providers who will require you to change your plan over from a term policy to a permanent life insurance plan, which could increase the amount you pay.
Check with your insurance provider in order to determine whether you will get a plan that is renewable or not.