Financial security for your family in the event of your death
People take out life assurance for many different reasons:
1) To protect your mortgage
2) To provide an income for your family if you die
3) To allow your business to survive if you die
4) To cover potential inheritance tax
Whole Life Insurance
Whole of life policies are designed to provide life assurance coverage for an individual's whole life, rather than a specified term. They contain a savings component, the idea of which is to build up a fund in the early years which will subsidize the life assurance cost in the later years. A death benefit is paid to the beneficiary if the insured die.
Premiums are usually fixed of the policy, which the policy is reviewed and the premiums or the sum assured may need to be amended depending upon investment returns and insured's needs.
Term Insurance
Term insurance is the cheapest and simplest form of life insurance. It doesn't contain any investment element - it simply promises to pay out if you die within the term. If you don't die within that time, you receive nothing.
Term policies can either be level or decreasing. A level policy simply means the sum assured remains level throughout the term of the policy. If you die on the first day of the policy, you get exactly the same sum as you would if you died near the end of the policy. A decreasing term assurance policy on the other hand, will pay out more at the beginning of the policy than it would at the end.
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