Term assurance policies
At their most basic these are policies where you have a fixed sum assured for a fixed period of time, e.g. £100,000 for 20 years.
If you survive the term, you get nothing. There is no element of investment.
As a rule, if you need to make any changes these will be at the discretion of the insurance company, (though some contracts will allow special occasion changes, such as being allowed to increase cover if you have a child).
- Cost – they are the lowest cost for protection, and if you have a requirement for a simple insurance of this nature you get maximum value for money
- Uses – for covering fixed or estimated liabilities, often used to cover debts such as mortgages.
One important use is for companies to insure their important staff members. If that person dies the company gets an injection of cash to help it keep going (for a small company the loss of a key salesman or designer could significantly harm the firm, and would at the very least present a massive and distracting management problem as an attempt is made to keep everything going).
Term policies may also be increasing (e.g. in line with inflation), decreasing, convertible, renewable (in that at the end of the term you could keep it running), but the main options and types are detailed in the following pages.
With such policies there is no surrender value and cover will cease if premiums are not paid.