Life insurance brings you peace of mind that in the event of your death, those that are left behind have some financial security. The amount of financial security left behind is tailored to suit your needs when you take out term life insurance. When considering a policy there are two different types of insurance you may wish to consider. These are known as level term and decreasing term life insurance and here is a brief and simple guide to both of them.

Life insurance may be needed for a wide range of circumstances.

• you may wish to leave your loved ones with some financial help towards meeting bills when you are no longer here;
• you might want to leave money to look after your children and help to put them through college or university;
• you may wish to leave your loved ones mortgage-free in the event of your death.

The difference between level and decreasing term

• Level term insurance pays out the amount an agreed sum insured if you die within the policy period (known as the ‘policy term’). If you are still alive when that term is reached, there is no payout and no refund of premiums.
• Decreasing term life insurance – also known as mortgage protection life insurance – is typically taken if you have a mortgage. Your sum insured is the amount left outstanding on your mortgage and the policy term is the length of time left to pay on your mortgage. As you pay off the mortgage, this amount decreases, and so does the amount that will be paid out on your insurance. If you are alive when you have paid off the mortgage, there is nothing left to claim on the insurance and the policy simply ends.

Factors to consider when choosing insurance
Many factors may be taken into consideration when you thinking about term life insurance, some of which may include:

• how much insurance you need – if you are looking for a level term life policy then this is generally based on the amount of financial security you wish to leave your loved ones. As a general guide you may wish to take your annual salary and multiply this by the number of years, you wish your family to have security. However, take inflation into account and things such as children and financial commitments such as a mortgage. O you may simply want a policy that clears your mortgage in the event if your death, so the sum insured would be this amount, on a decreasing basis;
• the term of insurance – how long you need to take your insurance over may depend on factors such as the age of your partner and children and whether you have a mortgage and are taking out decreasing term insurance;
• whether you wish to take out decreasing term in line with a mortgage (so, the sum insured amount decreases over time as does your mortgage) or whether you want level term insurance (where the sum insured remains the same);
• the cost of term life insurance – this varies with as to what type of cover you choose, and the life cover provider. Providers take into account such things as your health when applying, your age and whether or not you smoke and drink.

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