The first distinction to make is between Life Insurance and Life Assurance. Although these terms are often used interchangeably there is a difference: Insurance generally refers to an event that might happen whereas assurance refers to something that will happen.
Using this definition Life Insurance would generally cover accidental death whereas Life Assurance would cover for when the policy holder dies at the end of their life. However, most companies do not make such an explicit distinction between the two. It is of course important that you make it clear what type of cover you are looking for.
Life Level Term
Life Level Term Insurance provides the policy holder with a rate of cover that stays the same throughout the policy. The policy holder can decide on the number of years and the level of cover they require at the outset of the policy. The policy can be set up as a single life plan in which the sum of money that has been insured is paid out if the insured person dies before the end date of the policy.
Alternatively a joint life first death policy can be arranged. This is where two people are insured with the sum insured being paid out after the death of one of the insured.
People taking out this type of insurance can benefit from Critical Illness cover which means the sum insured is paid out upon the diagnosis of a critical illness. To include critical illness cover the policy holder will have to pay an additional premium. If the insured person survives the length of the policy then no money is paid out.
Mortgage Life Insurance
Mortgage Life Insurance is designed to cover the costs of a mortgage in the event of the death of a key breadwinner. It is a popular option for a family as it pays the outstanding balance of the mortgage in a lump sum if the insured dies before the end of the policy. As the insured is insuring to cover the cost of the mortgage the policy costs reduce over time as you repay more of your mortgage.
Mortgage Life Insurance can also be taken out in a single life plan or a joint life first death basis. In the latter the mortgage will be paid off in the event of one of the insured dying. This is where the policy finishes – nothing is paid out on the death of the second insured.
Mortgage Life Insurance also provides the option of taking out Critical Illness cover for the cost of an added premium. Critical Illness cover will pay out if the insured is diagnosed with a critical illness. If the insured survives beyond the policy end date then nothing is paid out.
Critical Illness Insurance
Critical Illness Insurance pays out if the insures is diagnosed with a critical illness within the dates of the Insurance policy. The amount of money covered by the policy can be decided at the outset as can the duration of the policy. It is available as a single life basis or a joint life basis.
The policy can stand alone but it is often added to a Life Level Term Insurance policy or a Mortgage Life Insurance policy for the cost of an added premium. If the insured survives the length of the policy then the sum insured is not paid out.
There are a number of companies that help you find the right policy for you by cross checking a number of different insurance companies for quotes.
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