Level term assurance and the various types of term insurance


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Level term assurance and the types of term insurance available


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Term assurance is a name given to life insurance that runs for a specified period of time i.e. term. Such as ten, fifteen, twenty or twenty five years, in fact just about any term can be selected the only limitation generally is age.

There are many different types of term assurance that you can have and I have tried to give a breakdown of the different flavours available such as Level Term insurance, Convertible term insurance renewable term insurance family income benefit and mortgage protection.

These are all forms of term insurance and for more information please read on or click the link to the left of the page that corresponds with the plan you would like to know about.

LEVEL TERM ASSURANCE

Or LTA as it is also known.

This type of insurance provides a lump sum of money on the death of the life or lives assured, i.e. the people insured under the plan.

If no death occurs during the term, then at the end the policies simply lapse, finish, with no value.

The word "level" means that the sum assured will not rise all fall it will remain level hence "Level Term Assurance".

CONVERTIBLE TERM ASSURANCE

Or RTA as it is also known.

This is is a form of Level Term Assurance and is designed to provide basic term assurance cover at outset with the option to convert to other types of policies such as Whole Of Life Insurance in later years as your personal and financial circumstances change.

There is generally restrictions on the types of policy that it can be converted to and on the dates when conversion is allowed.

Normally, conversion can take place without any additional medical information or any underwriting. It is for this reason that it is of great benefit as it means that you can purchase much needed cheaper life cover today and upgrade it to a better type of plan as you can afford it in the future.

There is usually a nominal cost at outset for this type of plan as the insurer is taking an unforeseen risk to provide cover in the future.

You will also find that this cover will normally only be available to people with little or no adverse medical history.

DECREASING TERM ASSURANCE

Or DTA as it is also known.

This type of plan is designed to provide a lump sum on death but as time goes by the sum assured reduces. This could be for many reasons but mainly for a decreasing liability for example Inheritance Tax Planning where you might be covering a tax bill that is diminishing over say the 7 year potentially exempt transfer rule.

This type of plan can also be used for the repayment of any outstanding loan on a repayment mortgage. The payout will normally be made on the death of one of the mortgagees.

There is no value to the policy once the mortgage has been repaid. Again if there is no claim on the plan at the end date it will cease without value.

RENEWABLE TERM ASSURANCE

Or RTA as it is also known.

This is very similar to convertible term in so much that it allows you to do something with the plan regardless of your state of health in the future ie free of medical underwriting.

This plan differs in so much that it will only allow you to renew the plan and not convert it to any other type of plan
This is generally Level Term Assurance and is designed to provide basic term assurance cover at outset with the option to convert to other types of policy such as Whole Of Life Insurance in later years as your personal and probably financial circumstances change.

There will be restrictions on the types of policy which it can be converted to and on the dates when conversion is allowed.

Normally, conversion can take place without any additional medical information or any underwriting and this is the main reason for selecting this type of cover as it will ensure you qualify for the more expensive cover at the outset regardless of your state of health in the future.

There is usually a nominal cost at outset for this type of plan as the insurer is taking an unforeseen risk to provide cover in the future.

You will also find that this cover will normally only be available to people with little or no adverse medical history.

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Here at Life cover quotes we deal with all the major insurers for a full list see the box below.

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