Level Term Life Insurance

Frequently Asked Questions

• What's the Difference Between Level Life Insurance and Decreasing Life Insurance?

  The difference between Level Life Insurance and Decreasing Term Insurance is how the benefit works over time.

  While a level policy, as the name suggests, sees the benefit remain fixed over time, a decreasing policy falls over the life of the policy, reaching zero by the end of the policy’s term.

  As Level Life Insurance doesn’t fall over time, it’s particularly suited for protecting an interest-only mortgage, where the outstanding mortgage balance also remains level over time.

  It’s also used to provide a degree of family protection that doesn’t diminish over time.

• Should I Add Critical Illness Cover?

  With a Level Term Insurance policy you can tie in Critical Illness Cover as well, this means that you will be covered if you were to suffer one of a defined list of critical illnesses as per the insurer’s terms.

  The Critical Illness Insurance element of the policy also remains level, meaning it will pay out a fixed amount over time.

  On such policies, the main three claims are for cancer, heart attacks and strokes although Critical Illness Cover protects against a range of serious illnesses, including multiple sclerosis and Parkinson’s.

  A typical policy will provide protection against the chances of you developing one of around 40 critical conditions, but there are policies which cover fewer than five illnesses and those which cover more than 100, so it pays to check the policy terms and conditions carefully.

  Adding Critical Illness Cover to your Decreasing Term Insurance policy will increase your premiums because there is a much greater risk of you suffering a serious illness than there is of you dying.

• What is Terminal Illness Cover?

  Terminal Illness Cover is very different from Critical Illness Cover, although many people get the two confused.

  Terminal Illness Cover pays out the Life Insurance benefit early if you’re diagnosed as terminally ill (usually defined as having less than 12 months to live).

  This is opposed to Critical Illness Cover mentioned above, which will pay out on you developing an insurer-specified critical illness without the condition necessarily having to be terminal.

• Single or Joint Policy?

  Term Life Assurance can either be taken out as an individual policy or as a joint policy for a couple.

  The latter is particularly useful where there’s a joint liability, such as a joint mortgage, that needs protecting.

  However, it’s important to note that a joint policy will only pay out once, most commonly on the death of the first partner, and then cease. This potentially leaves the surviving partner without cover at a time where they may find it more difficult to take out cover again.

  Depending on your circumstances, it may be more appropriate to take out two single policies. This will typically only cost a few pounds more per month but effectively provides twice the cover as you’ll receive a payout from both policies should both halves of the couple unfortunately pass away.

  One payout could therefore be used to repay the mortgage while the other could be used to help support the family.

• Should I Write My Life Insurance Into Trust?

  Writing your policy into trust is a very important detail that often gets overlooked.

  Doing so ensures your loved ones (the nominated beneficiaries) receive the Life Insurance payment promptly and tax free.

  If a policy is not written into trust it can end up forming part of the deceased’s estate, where it may become chargeable for inheritance tax purposes.

  Not writing your policy into trust can significantly increase the time it takes for the benefit also due to it potentially having to go through probate.