Term Life - what is it and how is it different?

Term life insurance (assurance in the UK) is one of many kinds of life insurance on the market today. Term is different than all the others, as you will see:

TERM:
Term life insurance (term assurance in the UK) provides a person with life insurance coverage for a specific term or number of years. Term life insurance premiums are typically lower than other types of life insuance because the death of the insured person is unlikely during the term of coverage, and if the person lives there is no payout of any sort.

When choosing a term life insurance plan you have to choose the face amount (how much would it pay out), your premium (some have declining premiums with declining coverage, while others have increasing premiums as risk increases), and of course the length or term of the coverage.


PERMANENT:
Permanent life insurance remains in place until the owner of the policy dies as long as he or she continues to pay the policy. Permanent life insurance builds in value over time, but the cost of permanent life insurance is often prohibitive. People can often put an equal amount of money in a savings account for the same period of time and get a better payout.


ENDOWMENTS:
Endowments are life insurance policies in which the value that builds equals a specific death benefit at each specific age. Endowments are considerably more expensive than many permanent plans because the insured is paying premiums for fewer years and can often collect a non-death payout sooner.


The most cost effective option is term life insurance, but in order to make the most informed choice for you and your family, consult with an insurance broker. Ideally you should consult with a broker that deals with all three types so that he or she knows the ins and outs and will no motivation to try to sell you on a particular kind.