Types of life cover, term assurance and whole of life

Temporary Assurances

Temporary assurances (term assurance) provides life assurance and /or serious illness cover for a fixed period (called the term) usually for a fixed premium. These policies are called temporary because they provide life and serious illness protection cover, when the policy term ends there is no cash pay out and the policy ceases.

The policy pays out a capital sum if the insured event happens, that is death or serious illness. Of course should the policy holder stop paying the premiums the cover will cease. The policy term is from 1 year upwards, typically 30 – 40 years, some life companies have an upper age limit on temporary assurances of 75 – 80 years.

There are five types of temporary Assurance Policies.
a: Term Assurance
b:  Convertible Term Assurance (CTA)
c: Section 785 Assurance
d: Family Income benefit (FIB)
e: Mortgage Protection (MPP)

Whole of Life Assurances

Whole of life assurance policies have no fixed term, they do not cease at a fixed point in time, they provide cover throughout life. However this cover might not be guaranteed. A Whole of life policy might have a small encashment value if the policy is terminated early. Whole of Life policies provide a guaranteed sum assured on death for a fixed premium. This premium is payable through life or may cease at a certain age, such as 65. So, the cover does not automatically end as it does with temporary assurances.

There are four main types of Whole of Life policies
a: With profit Whole of Life
b: Low Cost Whole of Life
c: Non Profit Whole of Life
d: Unit Linked Protection.

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