Understanding The Different Types Of Life Insurance

Taking out a mortgage is one of the biggest financial decisions you will ever make, therefore it is essential that you protect your life with life insurance, in case the worse should happen.

Life insurance will protect your loved ones by providing a lump sum payment in the event of your death, meaning they will not be left with financial worries. There are many different types of insurance and these are outlined below.

Level term assurance is the most basic type of insurance that you can take to cover yourself. This cover will make sure that if something should happen to you, then your loved one gets a sum of money which was determined at the outset in exchange for a relatively low premium. The policy has no cash in value and will only pay out during the term of the policy and is usually taken out alongside an interest only mortgage.

Decreasing term life insurance will decrease over a period of time in line with your mortgage. This type of cover will only pay out upon your death and is aimed at those who have a repayment mortgage in place. The amount paid out will be in proportion with the sum assured and this usually ensures that there is enough to cover the amount of capital which your dependants will still owe the lender of the mortgage.

Convertible term assurance can be turned into permanent cover when the term of the policy comes to an end, usually by taking out an endowment policy. If you aren't in the best of health then this doesn't matter as you cannot be refused the right to take out a new one. However there are some stipulations to be met and these include the inability to increase the amount of the insurance. Conversion of the insurance has to take place before the term assurance comes to an end and any new premiums which are taken out are based on your age and sex.

Always make sure you choose the type of policy most suited to your needs and when looking for the best deal dont accept the first quote you get. And if you don't understand the policy and what is and is not covered in it, then make sure you ask for a full explanation of the policy before committing yourself.

Finally, always be totally honest when taking out a policy as forgetting to or intentionally leaving out an existing condition from the policy could mean that your loved one cannot make a successful claim should they need to.

David Thomson is Chief Executive of BestDealInsurance an independent specialist broker dedicated to providing their clients with the best deal on their life insurance, critical illness cover and home and motor insurance.

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