This is the simplest and cheapest type of life assurance, and is known as term insurance because you choose how long you’re covered for, say, 10, 15, or 20 years (the term).
It only pays out if you die within the term you’ve agreed. If you live longer than the term, you get nothing. As a couple, you can take out term assurance in joint names, but the policy only pays out once on first death.
There are different types of policy you can have:
- family income benefit (a policy which pays out income rather than a lump sum)
- decreasing policy (where the level of cover falls over the years)
- level term ( where the cover remains the same throughout the term )
Decreasing term insurance is often linked to a repayment mortgage (where the amount you owe decreases over time) and may, in this instance, be called mortgage term insurance or mortgage protection life insurance.
Always compare the cover offered by a policy not just the price. Cheapest is not always best!