Different types of life cover

Life insurance (also known as ‘life assurance’ or ‘term assurance’) is a policy that pays out a lump sum in the event of the policyholder’s death, with the purpose of protecting loved ones and dependents against financial hardship.
Life insurance is usually available on a single or joint life basis with benefits including paying out on the diagnosis of a terminal illness. If the policyholder is alive when the policy expires no payment is made and, should the policyholder stops paying premiums at any stage, the policy has no value.
There are several types of life insurance:

• Level term insurance - designed to pay out a sum of money if the policyholder should die during the policy’s term. The sum assured is guaranteed and remains unchanged throughout the term.
• Decreasing term life insurance i.e. mortgage protection cover – where the sum decreases during the policy. It is regularly used to protect capital and interest repayments on a mortgage.
• Renewable term insurance – On the expiry date there is an option to continue without a health review.
• Convertible term insurance – Level term insurance with the option to revert to whole life or endowment insurance.
• Increasing term insurance – Due to inflation the value of money declines each year. Consequently, this form of insurance combats that with an escalating sum assured.
• Index linked term insurance – Some insurers provide the option for the premium to be increased each year in relation to the Retail Price Index.