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Term insurance

This is the most basic form of cover and provides for payment of the sum insured if the life insured dies during the period of the policy. If the life insured survives then no payment is made.

Level term life insurance

The same as term life insurance and the sum insured remains level during the period of the insurance. This is frequently used to protect the family against loss of the bread winner.

Renewable term life insurance

The same as term life insurance but the policy offers the option of renewal at standard rates for a further term period.   This can be useful where the Insured knows they have an immediate need for the cover but are not certain how long they need the cover for. The first term may be for five years, at the end of which the insured person would have the option to renew the policy for a similar term at the insurers standard rates applying to the insured life based on their age when the renewal terms runs. This renewal option would be provided without any need for a medical report so long as the life insured was under a certain age when the renewal was taken out.

Covetable term life

This is the same as a level term life policy but with the added option for the Insured to convert the policy to a whole life or endowment insurance without the need for further medical evidence.   If conversion is taken up the premium would be changed to the premium appropriate for the new policy type.

If the original policy was issued with some extra premium loading then the converted policy would bear a similar premium load.

Often these polices allow part conversion based on only part of the sum insured.

Premiums for convertible term insurance are slightly higher since they include the added risk that the insured may take up the conversion offer in the knowledge that ill health exists.

Decreasing term

With this type of term insurance the sum insured decreases by a set amount each set period (year or month). Its main use is to cover a decreasing debt over the period the debt it being repaid. The sum insured is often linked to the balance of the outstanding debt.

Although the life insurance decreases each year the premium remains constant.   In some cases the premiums may be payable over a shorter period than the term of the policy to avoid the insured cancelling the policy when the life cover it at its lowest.   For example a 25 year decreasing term policy may have the premium fully paid over the first 20 years.

These policies are usually slightly cheaper than the even term policies with the reduced cost expressed either as a lower premium per month/year or the premium being the same but paid for a lesser number of years.

Increasing term life cover

Because inflation can reduce the real time benefit of the sum insured going forward, these policies provide the benefit of an increasing sum insured.

Some offices allow the insured the option of increasing the sum insured by say 10% each year , some allow a renewable term life policy to be renewed for an increased sum insured. Some allow options to increase the sum insured on the passing of specific events such as the birth of a child or marriage.   Some polices can be indexed linked to the Retail Price Index subject to a certain maximum % increase.

Whenever the sum insured is increased the premium also increases.   Whether this increase in premium is based on the current premium level, or reflects the age of the life insured when the increase occurs will depend on the type of option connected with the increase.

These polices can also incorporate clauses that give the policy holder the right to convert the policy to a whole life and endowment.

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