Below lists different types of term life. Each is a choice representing how the policy operates. The choices can usually be mixed.
Decreasing term or level term.
With a decreasing term life insurance the sum insured decreases over the period of the term of the insurance policy. The rate of decrease is usually fixed to some other object such as the decreasing outstanding balance of a repayment mortgage. In fact this type of term insurance is mostly used to cover repayment mortgages. Level term life cover has a set fixed sum insured which remains constant over the period of the term.
Single or joint life.
The term life policy can be fixed to pay out on the death of a single life insured. However many couples want to provide life cover as a form of financial buffer if either member of the couple die. The term life can then be arranged to pay out if either of the joint lives die. life insurance policies can be arranged to pay out on either the death of the first person or to pay out only when both parties have died. It is now more common for these policies to be automatically worded to pay out on the death of the first person. However it is worth checking that point before you purchase the policy.
Variable premium or guaranteed premium.
Life insurance premiums get higher as your age increases. Some policies are written so that when you pass a certain age the premium increases relative to that age. This may be useful when you start the policy because the initial premiums will be lower. However at the end of the policy the premiums will be high. Policies can also be written where the premiums remained fixed and even each year. The premium will be higher at the policy start date but it never increases. This can make budgeting easier.
Written in trust or not in trust.
The starting point is that the policy will not be written in trust unless you request it to be written in trust. When the life insured dies the policy, if it is not written in trust, will form part of the dead person’s estate and be added to other estate values when death duties are considered. If however the policy is written in trust then it is assumed to always have been for the benefit of the person(s) who are the beneficiaries of the trust and this can avoid death duties. Because this involves tax law, trust law and can vary with an individual’s circumstance, it is not appropriate for us to go into great detail here. It is something you should be aware of and something you may wish to consider. Writing as policy in trust will not be the right choice for every person.
The author is Keith Clark who acts as a compliance consultant for Free to Work Consultancy. Keith is a Fellow of the Charted Insurance Institute. This article was written on the 15th February 2007. This article does not represent ‘financial advice’ as each persons individual requirements will be unique to their needs. If there is something in the article which you which to rely on then please check those details with any person from whom you purchase a term life policy at the time of purchase. The views in this article represent those of the author and not those of Netbasic Limited.by: Luke Ashworth
Article Source: www.articlesbase.com
