Insurance Guides and Resources

Two of the most relevant products, especially for people below 50, are Level Term and Decreasing Term. They are both designed to pay huge sums of money out to your loved ones if you die, and they are really good at doing this.

Life Insurance companies pay out on over 98% of claims. The 2% that don’t pay out is usually to do with inaccuracies on the life insurance application which is why it’s important to be totally honest when speaking to our advisors.

Level Term

  • Level – The Sum Assured (amount paid out in the case of death) doesn’t change – its level.
  • Term – A set length of time.
  • Assurance – Another word for insurance.

 

Level Term Assurance (LTA) insures you for a set amount for a set length of time. For example, £200,000 for 20 years. If you die at any point in the 20 years, your beneficiary receives the £200,000.

Decreasing term

  • Decreasing – The Sum Assured goes down over time to match what’s left on your mortgage.
  • Term – A set length of time (usually matching what’s left on your mortgage).
  • Assurance – another word for insurance.

Decreasing Term Assurance (DTA) insures you for a decreasing amount for a set length of time. For example, covering a repayment mortgage over 25 years. Die at any point in the 25 years and the beneficiary receives enough to pay back whatever remains on your mortgage. As the remaining owed amount on the repayment mortgage goes down month after month, so does the amount your cover needs to pay out.

Choosing between LTA and DTA

DTA premiums are significantly cheaper than their LTA equivalents (premiums being the monthly amount you pay to the insurer) because the financial risk to the insurer decreases over time.

For every month that goes by, the risk taken by the insurer reduces because the amount of mortgage left to pay has also gone down. For the reduction in risk, you are reward with lower premium throughout the term. It’s worth noting that the premium is set, and doesn’t drop – it’s always that low.

Using LTA to cover a mortgage

You might not have a repayment mortgage, in which case – an interest-only mortgage needs LTA cover because at the end of the term you still owe the initial amount.

Level Term Assurance uses

If you have children, setting aside a lump sum for them in the case of your death can provide them with all the help they need, financially, to get a good start in life, covering anything from university fees, to paying for a wedding or buying their first car. It’s totally up to the beneficiary what the money is spent on – it’s paid as a tax-free lump sum into the bank.

In short, Decreasing Term Assurance is really designed for paying off a repayment mortgage, and Level Term Assurance is for either an interest only mortgage, or other living expenses not tied to mortgages in any way.

Can I have both?

You can – and sometimes that’s what will be advised. Again, your personal needs are different to everyone else’s, so call and speak to one of our advisors to get more in-depth advice.

Term meaning

Term is the length of time the cover lasts. You pay until the end of the term, and your cover is valid until the end of the term, but once it is done, it’s done. If you take out a twenty year plan, then twenty years is what you get - you are no longer covered the day after the end of the twentieth year.

Many people might see that as a problem, but if you have outlived your policy then your mortgage has been paid, your children have been looked after, and you are still alive. No one should be upset once their Life Insurance cover has ended!

Of course, there are add on’s to cover that can be applied to your insurance policy but these change once you are over 50. If you would like more information on over 50’s life insurance then take a look at our resource pages.

Any more?

There’s a great deal more – chat to a Quick Quote Life advisor about the options. You can add Critical Illness Cover to pay out if you become critically ill, you can tie your cover to indexation or have joint cover with a partner.

The website contains more helpful guides and for some in-depth documentation, head over to our sister site Quick Quote Life and have a read.

Of course, for the finest advice, give us a ring!

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