Common Questions About Term Life Insurance

by Chris Johns

What is Term Life Insurance?

When you buy a term life insurance policy you are covered for a set amount of time according to the terms of the policy. Once that set time passes, the policy terminates whether or not a claim has been made. A term life insurance policy pays out if you die or, where available, you are diagnosed with a terminal illness whilst the policy is in effect.

Can I get a joint Term Life Insurance policy?

Yes, you can. Your policy can cover you and your spouse, for example. However, a joint policy terminates when a claim is made just like a single policy. If your spouse dies, the policy terminates and you are no longer covered. This could be a disadvantage if you still have financial dependants and the cost of life cover may have increased because you are older.

Do I get money back when the policy terminates?

No. Unlike some Whole of Life policies, a term life insurance does not build cash value, so you will not receive any money back when the policy terminates, and you cannot draw on the policy while it is in force.

What are the advantages of term life insurance?

The main advantage of term life insurance is that it is typically much less expensive than whole life insurance. This is because a term life insurance can (and usually does) terminate without a pay-out occurring, whereas with a whole life insurance policy, a pay-out will always occur as long as the policy is retained, even though it may be several years or even decades before it happens.

Term life insurance is a good option if you need to insure against a specific situation that you know will end after a certain time. For example, a mortgage or if you have children and you want to provide protection until they are adults. It's also a good option for young couples who don't have children but plan to in the future.

What is Decreasing Term Life Insurance? Why would I want it?

Decreasing term life insurance reduces the amount you are covered for over the life of the policy. This is a good option for people with repayment mortgages who want to leave money for their dependants to pay off the mortgage if they die or are diagnosed with a terminal illness. The value of the policy (and the size of the pay-out) reduces in line with the size of the mortgage balance owing. Decreasing term life insurance is typically less expensive than conventional term life insurance.

How can I save money on Term Life Insurance?

Getting several different term life insurance quotes is the easiest way to save money. Be sure to compare policies carefully, especially if you want the policy to cover terminal or critical illness as well as death. Check the illnesses that are covered and note that, for example, not all types of cancers are covered by a typical critical illness insurance policy. If you are in any doubt, seek help from an independent adviser or broker.

As with all types of life insurance policies, you'll pay a lower premium if you're a non-smoker and are in good physical health. You may also be able to save money if you pay your premiums annually rather than monthly or quarterly.

How do I make a Term Life Insurance claim?

Making a claim is a fairly simple process, as long as you've taken care to be accurate and truthful when applying for the policy. In most cases simply making a phone call to the insurer is the best approach for starting the claim process. If you're the owner of a life insurance policy, make sure your beneficiary knows who your insurer is, and where you keep the policy, to help make the claim process easier.

What if I am unsure?

If you are at all unsure about buying life cover you should get professional advice from a regulated adviser. It's also important that the adviser is independent and has access to the whole market rather than being tied to just a few providers.

About the Author
If you know what life cover you need and don't need advice, a discount life insurance broker can save you up to 40% by sacrificing some of the earnings received from the insurance company. Visit Life Saver to compare discounted life insurance quotes from up to 20 UK insurers.