Common varieties of life insurance

Life insurance is by nature a serious subject, understandably avoided by most young people as something to be considered when all new music starts to sound like a racket. Actually, the sooner the better with life insurance, in term of affordability, but since you are unlikely to be reading this article if you are young and uninterested we shall leave that point here. Life insurance is about financial security for those you leave behind. At a basic level, here is how it works.

Whole of life insurance provides the cover that most people who are not familiar with this subject would expect. You die, the policy pays out – unless you top yourself, but you get the general idea. It doesn’t matter when you die, as there is no time limit on the policy. The amount that will result from a claim is called the sum assured. The higher this figure, the more expensive the life insurance policy. In general, whole life insurance costs the most out of all the different variants.

Term life insurance on the other hand is a finite contract that you may well outlive. When the term is over, the deal is over and your death will be a good deal less profitable for your dependants. The jargon for this is that the policy has no surrender value. This all means that term life insurance is generally cheaper than whole of life insurance.

For a fixed lump sum to be paid on the event of your death within the term you need level term life insurance. Cheaper than level term life insurance is decreasing term life insurance, with the sum assured decreasing over the life of the policy. The amount paid out usually tracks the balance on an outstanding debt, such as a mortgage. As what is left to pay on your mortgage decreases over the years, so does the amount that a claim will pay out.

There are several other types of term life insurance, including the increasingly popular convertible term cover. For more in depth information about this and other policies, try contacting an established provider of life insurance like Santander for expert guidance.