Term Assurance

Term Assurance is a simple and cost effective way of providing life cover. As its name suggests, term assurance provides life cover over a specified number of years, at the end of which the contract ends and cover ceases. Payment of the life cover amounts would be made only on the death of the insured. At the end of the term, the policy ceases without value.

The cost of providing this life cover is usually fixed for the term of the policy and is based on your age and state of health when the policy is taken out. A Term Assurance policy therefore offers a degree of financial security for a modest cost.

It is worthwhile outlining the product features of the contract recommended to demonstrate why it is suitable to your current circumstances and stated objectives, which I outlined earlier.

Level term assurance policies have a known level of cover that will be paid out in the event of death within a known period of time. Premiums remain level throughout and should you survive the policy term, there will be no benefit.

As this type of contract only provides cover in the event of death there is no surrender value, so if you stop paying the premiums at any time, your cover will cease.

Premiums are based on your personal circumstances but the main areas for consideration by an insurer are your age and state of health. The older you are, the higher the premium will be. Similarly if you have or had a serious ailment the insurer may seek to charge you more or in some cases be unwilling to cover you at all. Higher levels of cover and longer policy terms all increase cast as will the fact that an individual smokes.

Essentially, level term assurance is cheap cover on your life for the benefit of your family or for your business, but there are limitations to it.

As it is a fixed term, there is no flexibility and you will be unable to increase cover or extend the term. Should you therefore find yourself ill at the end of the term you may be unable to obtain further cover.

There is no investment element to the policy, and your sum assured will take no account of inflation.

It is essential that you take professional advice prior to proceeding with any of the solutions outlined within the guides.

These guides do not provide individual tailored investment advice and are for guidance only. You should not act independently on the areas covered here but should seek professional independent financial advice. These guides represent our understanding of law and HM Revenue & Customs practice as at the date of publication. We cannot assume legal responsibility for any errors or omissions they might contain. Levels and bases of, and reliefs from taxation are currently those applying or proposed and are subject to change; their value depends on individual circumstances of the investor.