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What is term life insurance?
There are two principal types of life insurance: term life and whole life. We're looking at what term life insurance is, what it's used for, and whether it's the right policy for you.
The 'term' of 'term insurance' refers to the time the policy runs for, which is defined by you and your insurer when the policy is taken out. It's also known as a policy's 'lifetime'. Depending on what you want your payout to be put towards, the length of your term can be longer or shorter. There will always be a maximum possible length, which can vary by insurer.
These policies are designed to pay out if you die during their lifetimes. However, if you die after the term has expired, your provider will not pay out.
The advantage of term life over whole life – which insures you for however long you live – is that premiums are usually cheaper, and the different types of term policies are designed to be used for specific ends.
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Decreasing term life cover
Decreasing term life cover is designed to pay off an outstanding debt like a repayment mortgage, so the cover amount decreases similarly to how the outstanding balance of a mortgage reduces.
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Level term life cover
Level term life cover offers a fixed cash lump sum payable upon the policyholder’s death. Like decreasing, it can be used to pay off debts. However, it's also used to leave a legacy or help your loved ones cope with a range of financial considerations.
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Increasing term life cover
Increasing term life cover is a way to reduce the impact of inflation on the money you leave behind for your loved ones. Your cash sum paid out will increase annually in line with retail price index, up to a maximum of 10%.
Term life insurance vs whole life insurance
It's never enjoyable to imagine how much longer you've got to live, and with advances in medicine, it's not something you can easily predict. However, the likelihood of living a further 50 years diminishes after a certain age. Taking out term life insurance at this stage is likely to be far less expensive than a whole life assurance policy that would cover the same period.
Term life is also used only for its payout. Whole life policies sometimes include a 'cash value' – or an amount that can be borrowed against while the policy holder is alive. It can mean whole life insurance policies are significantly more expensive for the same amount of cover.
Term life only functions as insurance (it can't be borrowed against or have attached savings accounts, for instance) and is generally more affordable.
How do I know if I need term life cover?
If you're thinking about buying life insurance, you've probably started to assess what financial situation you'd leave your loved ones in should you no longer be around.
It's always a good idea to take stock of your financial situation, even if there's no specific reason to do so. The amount of money you leave loved ones will significantly impact their lives and may help when deciding on important life choices, such as whether they could stay in the same school or continue to live in the house they're used to.
Consider the amount of money you're likely to leave and compare it to the ongoing cost of living that'll continue after you've gone. Check your employer's death-in-service policy to see how much it would leave your loved ones and factor in any savings, investments and saleable assets you may have.
Compare that to your financial obligations, such as mortgage repayments, day-to-day living expenses and contracts. Try to be as thorough as possible, as even things like insuring, taxing, servicing and running a car can potentially cost thousands of pounds.
You may discover your loved one's ability to finance life as they know it would change dramatically without your income, even if you're well-off. If you find yourself in this position, buying life insurance may become a serious consideration.
Term life cover, critical illness and terminal illness
Insurers differ in how they cover critical and terminal illnesses. Post Office Life Insurance offers protection against terminal illness as standard. Critical Illness Cover and Children's Cover can be purchased as an add-on, providing extra cover if you or an insured child are diagnosed with a critical illness that meets our definitions.
Critical illnesses are defined very specifically by each insurer, and while they're broadly the same, they might have important differences. Read the definition of a critical illness in our terms and conditions for more information.
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What does a term life insurance quote consider?
To get a term life insurance policy, a number of factors will have to be considered to assess your situation and level of risk. The insurer will use these factors to judge how likely a claim will be made during your policy term.
Smokers, for instance, are likely to attract higher premiums than non-smokers. And people with certain pre-existing medical conditions may find it hard to get covered. Similarly, many 'standard terms' policies don't cover certain professions (such as soldiers).
If you only want term life insurance to cover your outstanding mortgage, you may not want to pay for a policy that also provides a level lump sum. It's important to think about how long is left on your mortgage/loan and the % interest rate which applies.
The most important factors will be:
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your age
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your lifestyle, including if you’re a smoker
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any pre-existing medical conditions
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your health
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you and your family’s medical history
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your job
Use our calculator tool to work out how much life cover you may need to protect what matters most.
Post Office life cover options
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Life Insurance
Choose between level, decreasing or increasing term insurance, each designed to offer you peace of mind based on your circumstances.
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Over 50s Life Cover
If you're aged between 50 and 80, we could help you leave a cash sum for your family or towards your funeral costs.
Important information
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What is life insurance?
Life insurance can offer your loved ones peace of mind and financial security if you pass away or become critically ill.
Things you need to know
*0330 & 0345: Calls to 03 numbers will cost no more than calling a standard UK number starting with 01 or 02 from your fixed line or mobile and may be included in your call package. Calls may be monitored or recorded for training and compliance purposes.
Post Office Life Insurance is underwritten and administered by Scottish Friendly Assurance Society Limited. Neilson Financial Services Limited assist in the administration. If you buy Post Office Life Insurance over the telephone or online via the Post Office website, it is arranged and sold by Neilson Financial Services Limited, following an introduction by Post Office Limited. If you buy Post Office Life Insurance online via a price comparison website, it is arranged and sold by the firm that provides the price comparison website services.
Post Office Limited is an appointed representative of Post Office Management Services Limited which is authorised and regulated by the Financial Conduct Authority, FRN 630318. Registered in England and Wales. Registered numbers 2154540 and 08459718 respectively. Registered office: 100 Wood Street, London, EC2V 7ER.