Term life assurance explained

15 May2021

There are many different life insurance policies available and it can be difficult to know what they all mean. Term life assurance is a simple concept. All it refers to is any life insurance policy that lasts for a certain amount of time - or a "term." The alternative to this would be a whole-of-life policy, which would last for the rest of your life.

Why choose term life assurance?

Some people want life insurance to last for the rest of their lives. These people want their family to receive a cash payout no matter what happens, whether they need it for a particular purpose or not. Many other people, however, only want life insurance for specific reasons. For example, many invest in life insurance to make sure their family can pay the mortgage. If you have an idea about when your mortgage will be paid off, you could plan your life insurance to end around that time. It often doesn't make sense to pay for something longer than you think you'll need it.

Click here for information about the different types of life insurance available.

Types of term life assurance

There are two main kinds of policy when it comes to term insurance. They both only last for a fixed period of time, but cater to people with very different requirements.

  • Level term cover

    may be a good option for people who want to pay a fixed price per month for a specified final cash sum. The size of the final cash payout will be determined by how much you can pay every month. In general, the more you can pay each month, the more your family will receive if you die. Level term cover may appeal to people who want to know exactly how much their family could receive within the time frame of the policy.
  • Decreasing term cover

    requires a little more insight into your financial future. If you can plan how much your family will need at any given time, and you find that the required amount actually decreases as time goes on, decreasing term cover may be suitable. This kind of cover is generally cheaper because the amount your family could receive gradually gets smaller as the policy goes on. There are several scenarios commonly associated with decreasing term cover, such as using the money to pay off a mortgage or support your children (both of which can decrease in cost over time). If you finish paying off your mortgage, there is no need for an insurance payout to help with your mortgage. If your children reach financial independence then your policy may not be necessary. The money your family could receive is therefore designed to decrease in line with these kinds of scenarios.

You can find more on term life insurance here.

Term life assurance can save you the expense of paying for cover your family will not need. Once it expires, however, your cover will end. If you find that you want more cover you may consider renewing or buying another policy.

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