Life Insurance (with terminal cover included) is a form of insurance that pays out a lump sum if you die or fall terminally ill during the period covered by the policy.
Life Insurance is also some time known as “Term” insurance because the policy only remains in force for a pre-determined period of time – the “term” of the policy.
Very few Companies will offer a policy for less than 5 years and 20/25 years is the most common period for a policy to be in force. Many Companies will not extend cover to beyond the age of 65 however some will go past 70.
All good Life Insurance policies will include Terminal cover free of charge. If a policyholder were diagnosed with a terminal condition from which a Doctor expects him, or her, to die within 12 months, the policy would pay out immediately and not wait for the policyholder to actually die.
You can have a life insurance policy that covers one or two people (that’s a “Joint” policy). If it’s a joint policy, most people will elect to the policy pay out when either of the insured persons dies or becomes terminally ill. There is another variant however, which only pays out if both policyholders were to die during the policy’s term. This is commonly known as a second death benefit life insurance policy.
Another important point is whether the cover is ‘level’ or ‘decreasing’. With level cover the sum insured remains constant during the entire period the policy is in force. With decreasing cover the sum insured, steadily reduces during the time the policy is in force. Decreasing cover is generally used to support a repayment mortgage, where the capital outstanding on the mortgage decreases each month as part of the mortgage repayments repay part of the original sum borrowed.
A Life Insurance policy does not have any surrender value. Once the policy comes to the end of its term, that’s it. The policy is complete and finished and has no value.
Please be aware that there are also other variations and optional extras available within a life insurance contract. You’ll get more information when the life insurance adviser phones you.