2.2 Product Features
2.2.1 Term Assurance
- Policy pays out only on death within the policy term.
- No payout at the end of the term.
- No surrender value or any other accrued value in the policy
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Level Term Assurance has a fixed sum assured during the
term. Suitable where a fixed level of protection required.
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Decreasing Term Assurance reduces the level of cover over
an agreed period, usually on a pre-determined scale. Suitable to
cover a reducing risk or debt, such as a capital and interest mortgage,
when it is often termed mortgage protection.
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A specialised form of decreasing term cover is used to cover any
outstanding tax due on a Potentially Exempt Transfer (PET) during
a gift's seven year tapering relief period. The cover is often termed
Gifts Inter Vivos cover.
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Convertible term permits the policyholder to change cover into
a policy providing permanent or longer term cover without providing
further medical evidence. The premium applicable will be that relevant
to the age of the policyholder on conversion. The right to convert
cannot be refused by the life office under normal circumstances.
Suitable where current funds do not permit taking out permanent
cover, or where future plans are not finalised.
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Family Income Benefit is in essence a decreasing term assurance
policy where the sum assured is payable by instalments from the
date of claim until the original term expires. The income may be
level or increasing, or may be exchanged for a lump sum. Suitable
for providing guaranteed income during periods of expensive dependency
following death of, say, the main income earner. Particularly useful
for guardians.
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Renewable Term effectively guarantees insurability, as the option
in the policy is to extend for a similar term at the end of the
initial term. The option usually ceases at an 'age ceiling' and
may include an option to increase the sum assured by, perhaps, 50%.
As with convertible insurance, underwriting is not required at this
point, and premiums will relate to current age.
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Where a policy includes a non-medical, no-underwriting extension
or increase, it could prove to be a valuable asset in the event
of ill health, as the conversion or renewal option is available
whatever the state of health.
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