Term Life Insurance
Cream have access to different products for different needs…
Term insurance pays out when the policyholder dies within a period of time set by the insurer. Most policies run for between 10 or 25 years, but you specify how long you want the term to be.
If you die during the term, the policy will pay out the amount agreed at the start, which is known as the ‘sum assured’. Some policies will also pay out if you are diagnosed with a terminal illness, though you usually have to ask for this.
If you live beyond the term of the policy, the cover simply comes to an end – there is no investment element or any return of premiums.
The policy might not pay out if you die too soon after taking out cover, so always read the small print carefully before buying.
There are three main kinds of term insurance:
- Level term insurance
- Decreasing term insurance
- Increasing term insurance
With level term insurance, the sum assured is the same in the final year of the policy as it is in the first.
Decreasing term insurance is cheaper to take out, but the potential pay-out will fall over the term.
This sort of cover is often taken out to back a repayment mortgage, so the sum assured shrinks along with the outstanding mortgage debt.
Mortgage providers will often try to sell you life cover when you apply for your mortgage, but always get quotes from other providers before buying to ensure you find the best possible deal.
Under increasing term insurance, the pay-out increases over time to keep pace with the rising cost of living. The sum assured either increases by a fixed amount each year, typically 5%, or is pegged to the Retail Prices Index (RPI) measure of inflation.
As the amount of cover increases over time, premiums for this sort of policy are more expensive than for level or decreasing cover.
Different types of life insurance policy
There are various types of life insurance, but term insurance is the most common and the most straightforward. Term insurance pays out a cash sum if you die within the term of the plan and is not normally subject to income or capital gains tax. It is known in tax speak as a ‘qualifying policy’.
People take out term insurance primarily to provide financial security for their family. So, if you have young children you might take out level term insurance to pay out a lump sum of £100,000 on death within a 20-year term.
Each type works a little differently:
- Level term insurance: Pays out a fixed lump sum if you die during the policy term. This lump sum won’t change over time, so you and your family know exactly what will be left with in the event that they need to claim
- Increasing term insurance: Designed to combat rises prices and inflation, the sum insured maintains its real value throughout the term. It is also known as ‘index-linked term life insurance’ and the sum either increases by a fixed amount each year, or rises in line with the retail prices index (RPI) measure of inflation
- Decreasing term insurance: Covers a debt that gradually reduces over time, such as a repayment mortgage. It is worth considering decreasing term insurance if you have a mortgage or any big debt you would need to pay off in the event of your death. With this type, any pay-out also reduces over time, which means the premiums are understandably lower than for level term insurance or increasing term insurance
- Convertible term insurance: As its name suggests, convertible term insurance enables policyholders to convert their policy into a whole-of-life policy should they wish to. Good news is that the insurer is obliged to convert the policy regardless of any changes to the policyholder’s health
- Renewable term insurance: With renewable term insurance, policyholders have the option to renew their life cover when the policy term finishes without the need for a health review
You can also buy something called family income benefit, which makes regular payments to your dependents instead of a lump sum if you die within the policy term.
Your Cream adviser will ensure you get the product you need, with the right provider, at a price you can afford.
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If you have queries about your existing policy please get in touch.
Learn more about Cream, our mission and commitment.
PROTECTED FOR LIFE
Life insurance could be the most important financial product you ever buy.
If you die while you still have dependants, being able to claim on a life insurance policy could be the difference between your loved ones struggling to make ends meet, and their financial security.
Despite this, many of us simply don’t have any life insurance cover in place. Your Cream Financial Services adviser will ensure you get the product you need, with the right provider, at a price you can afford.
Refer a friend
Cream operates a refer and earn scheme and we'll pay up to £50 for each successful Life insurance referral.
Cream offers a free Will service worth £130 which is available with every Life policy taken out.
Every Life policy taken out with Cream has the option to have a free trust set up for you if you wish to do so.
Cream Financial Solutions
49 Waterloo Road
2-4 West Street, Fareham
2nd Floor, Lowry Mill
Lees Street, Manchester
Bespoke tailored insurance solutions built around you and your family. Completely free initial consultation. Quality, personal advice.