Optional Life Insurance Extras

Types of Term Insurance

Although term insurance is the most basic type of life insurance, and the least expensive there are a number of differing variations on a standard term insurance plan - people will want to take out term insurance for a number of different reasons, to protect their mortgage, ensure there are provisions for income, or perhaps they will want to switch to whole life insurance at a later date.

Decreasing Term/Mortgage protection insurance

Decreasing term life insurance, also known as mortgage protection insurance pays out a lump sum in the event of the death of the policyholder during the term in which your policy runs. The total sum decreases over the term of the life insurance policy, corresponding with the amount outstanding on your mortgage. Mortgage Protection Insurance is often used to protect a capital and interest repayment mortgage, where the outstanding balance of the mortgage reduces each year.

Increasing Term

In contrast to decreasing term insurance which is used to protect mortgage repayments, premiums on increasing term insurance continually go up in order to counter effects of inflation, so that the total sum paid out will still have value.

In addition, because the insurer will be substantially increase the level of cover without the policyholder having to produce any other medical evidence, the initial premiums for these increasable contracts are higher than those for ordinary level term assurances for comparable sums assured.

Family Income Benefit

If you die during the term of the policy, you can arrange for a regular income to be paid to your dependants for the rest of the term. The income can be paid monthly, quarterly or annually. On some policies you can opt for the income to increase each year at a fixed rate, by either a pre-set rate or in relation to inflation.

Renewable Term

Term Insurance with the option of a Renewable Term pretty much does what it says on the tin - if you are approaching the end of your term, you have the option, after a specified period, to take out an extension on your term policy, usually without the need for any further evidence of health, providing the policy will not continue beyond a certain age, this is often 65, or your age of retirement.

Convertible Term

Convertible Term means that should you want to, you can convert the policy to whole life or insurance without having to provide further evidence of health. The new policy will usually cost the same as a normal whole life or endowment policy based on your age at the date when you exercise the option. Convertible term life insurance is popular with young families with a strict budget, who might want to switch to a policy which guarantees a future payout once earnings increase. Customers can also switch to endowment insurance from a convertible term insurance plan.

Whole Life Insurance & Investment Type Optional Extras

Critical Illness Cover - This provides cover against the risk of you having a serious illness. This type of insurance can be bought on its own or as an addition to whole life, endowment or term insurance - critical illness cover is explained in greater detail elsewhere on this site.
 

Waiver of premium - If you are unable to continue working due to illness or injury, then having added this option to a policy sees you insuring  your premiums to maintain the benefits of the policy.

Related Frequent Questions:

• Life Insurance Explained
• Investment Options with Life Insurance