Lifetime coverage
This type of insurance policy explicitly guarantees the insurance beneficiary a predefined payment regardless of when the insurance benefactor dies. This is different from the other types of insurance coverage that are only required to make the payment to the beneficiary if the insurance sponsor dies before a specific date.
This is perfect for a hypothetical scenario where insurance is only necessary to guarantee payment on a mortgage that typically lasts 25 years. Lifetime policies generally cost more than other types of coverage, this is expected because the coverage is guaranteed to issue payment at some point in the future.
Term insurance is an alternative to consider when looking for a cheaper life insurance policy
Term insurance
Term insurance, also known as term life insurance, offers a guaranteed payment to a family as long as the insurance sponsor passes away within a specified period of time. So to speak, the paradigm of insurance benefactors is to make sure that, in the event of unforeseen events, your dependents can cover living expenses such as a mortgage or lost income.
Considering that a typical mortgage pays off in 25 years, it is absolutely unnecessary to extend life coverage beyond this period. Also, an insured may want coverage to run after the children have completed school and are therefore independent.
Limiting the term of your life insurance policy in this way will reduce the premium you pay versus lifetime coverage. This type of policy is also known as a uniform term guarantee due to the fact that the insurance design is the same regardless of when the policyholder dies.
Declining term insurance (also known as mortgage life insurance)
There is an alternative option for prospective term life holders to lower the premium each year. This measure is generally taken to correlate with the eventual decline in mortgage debt as more outstanding debt is settled each year.
An example is seen in a hypothetical scenario where someone took out 25-year term life insurance to cover £ 150,000, which correlates to a 25-year mortgage debt. However, after 15 years, the mortgage holder would have paid off a considerable amount of the debt.
To avoid a situation where the insured pays more than required in premiums, decreasing term insurance comes into play in such situations; In essence, the premium will be lower than that of normal term insurance.
Term insurance increase
Unlike declining term insurance, an insured can request that the potential payment increase each year to reflect a marginal increase in inflation. With an index-linked policy, you can choose to link the insurance payment directly to an inflation measure such as the Retail Price Index (RPI) or the Consumer Price Index (CPI), make a predefined arrangement for the scope of coverage increases by a fixed percentage annually.
As such, the premium payable will be higher than term and declining term insurance.
Renewable term insurance
In this type of policy, coverage is provided only for a fixed period. An example is medical insurance, in which the term can be extended once it has elapsed without the need for a new medical check-up. Although the premium may increase as the insured ages, health problems that arise after the initial policy is purchased will not be considered in the new cost of the policy.
Joint life insurance
It is a single policy that will be payable in the event of the death of one of the bride and groom. This is usually cheaper than paying premiums on two different policies. It is important to note that a joint policy will be paid on the first death, which also cancels the policy coverage. In the event that there are two separate policies, the second policy will remain valid regardless of the claims of the first policy.
In-service death benefits
There are a number of corporate organizations that offer the family of staff a lump sum in the event of death while on active duty with the company, regardless of whether the death is associated with their work. Likewise, members of company pension plans may also be entitled to pension payment if they die before retirement.
It is important to note that the payment of life insurance coverage is equivalent to three or four years of salary in the event of death in service. Unfortunately, this amount may not meet the family’s needs and policy coverage may end as soon as one leaves the company.
