Types of Life Insurance

Life insurance is also known as Life Assurance. However, the terms “insurance” and assurance” have two different specific meanings.

• “Insurance” is used in reference to providing cover for an event that might happen such as fire, flood, burglary, etc.
• “Assurance” is a term used to describe the cover for an event which will definitely happen such as death.

In today’s environment the two terms have been accepted to be used as having the same meaning.

Life Insurance can be taken as a single or joint life policy with benefits including pay out in a case of death, diagnosis of critical or terminal illness.

An important fact to keep an eye on is that if the insured person is still alive at the time when the policy expires no payments will be made by the insurer. If the policy holder stops paying the premiums at any stage the policy will have no value.

There are several types of life insurance:

Term Insurance – also referred to as temporary insurance. It is a type of life insurance where the policy is triggered to pay out only if death occurs within a specific period of time.

• Level term insurance – is a fixed premium for a specific period longer than 1 year. It is designed to pay out a sum of money in case the insured dies within the specified term. The assured sum remains constant for the term and is guaranteed.
• Decreasing term life insurance also known as mortgage protection insurance – In this policy the sum decreases with the time. The insured amount is usually equal to the amount of the mortgage on the policy holder’s home so the mortgage will be paid off if the insured dies.
• Renewable term insurance – On the date of maturity there is an option to renew the policy without a health review in order to proof insurability. Some companies guarantee renewing the policy without health check while others do not.
• Convertible term insurance – Level term insurance with the option to revert to whole life or endowment insurance.
• Increasing term insurance – It is designed to counteract the declining value of money due to inflation year on year. It achieves that by increasing the sum insured to cover the inflation.
• Index linked term insurance – Similar to the Increasing term insurance but instead of increasing the insured sum according to the annual inflation it is increased based on the Retail Price Index.

Permanent Insurance – is a life insurance which remains in force until the policy pays out (matures). In case the owner stops paying the premium when due the insurance will laps and will be void in which case the owner loses all the investment he has paid into it.

The permanent insurance policy cannot be cancelled. The owner can access the built up monetary value of the policy by withdrawing cash, borrowing against the policy or surrendering the policy and receiving the surrendered value.

There are 4 basic types of permanent insurance: Whole of Life, Universal Life, Limited Pay and Endowment.

It is not easy to decide which life insurance is the best option for you. We recommend you speak with a professional and FSA regulated insurance advisor. You can do that by filling in the Quote Form and one of our advisors will call you back.