What is Term Assurance?

A policy that pays out only if death occurs within a certain period. There is no savings element.

The term assurance plan is an insurance plan that pays out a lump sum if you die or are diagnosed with a terminal illness, or if you are diagnosed with a specified critical illness. The plan only pays out once.

Under term assurance if you die at any point during the term the person entitled to the proceeds will receive the assurance amount.

Assurance is similar to insurance except that insurance protects policyholders from events that might happen.

Level Term Assurance is the most basic type of life assurance. For fixed monthly payments, the amount of life cover - also known as the sum assured - is guaranteed for a fixed term. The lump sum is paid out if death occurs before the policy ends.

Types of Term Assurance 

Level Term Assurance

Under such assurance the death benefit remains fixed for the term of the policy which can be anything from 1 year to 25 years or more. Most policies have a term of between 10 and 25 years.

Decreasing Term Assurance

Under decreasing term assurance the death benefit reduces by a set amount each year.

Increasing term assurance

Under increasing term assurance a sum assured goes increasing at a predetermined rate that can be 5% per year. Premiums may also increase at a predetermined rate.

Convertible term assurance

Under convertible term assurance a built in option is present to convert the plan to an endowment or whole of life plan during the current policy term without the need for further medical evidence.

Family Income Benefit

Under such policy a regular income on death of the life assured for the remainder of the term of the policy. Regular income can be commuted to a lump sum.

Benefit of Term Assurance

Term Assurance policy provides the option to upgrade insured policy in the future if higher earnings make a With-Profits Plan more suitable for your needs at that time. It can also have the option to convert without any medical evidence to any With-Profits Plan.

Other Benefits are

Cover can be purchased with or without critical illness cover

Normally includes terminal illness benefit as part of the standard policy

Accepted by most major lenders as suitable cover for your mortgage

Cover reduces to match the outstanding mortgage amount. Ideal for re payment mortgages or loans.

Premiums guaranteed not to increase from acceptance for the policy term.

How many Persons it can cover

Under term assurance policy you can cover one or two people aged between 18 to 79.but during claim time your joint plan will be end.

How much cover I need

It depends upon following points that how much you can cover such as

1. Amount of money you want to leave for your dependants.
2. Amount of your interest only mortgage, if it's not already covered by life insurance
3. Amount of any other outstanding loans not already covered by life insurance
4. Cost of funeral expenses.
5. Education costs for your children, if you want to allow an extra amount to cover school/university fees
6. Anything else you want to leave money for in the future
7. Less the amount of life assurance you've already got, apart from mortgage cover

Depending upon the following points you can get a estimate that how much you can cover under term assurance.

Important to Note

Term Assurance policy is issued for a specific period of time the insurance period for a pre-determined sum assured or death benefit. On the death of the life assured within the insurance period the death benefit is paid. Should the life assured survive the period then nothing will be paid.