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Life insurance isn’t the cheeriest of topics, but if you have people depending on the money you earn then it’s nonetheless important. The problem is, with so many different types of life insurance policy available it’s often difficult to find out exactly what you need and want. In basic terms, a life insurance policy will pay out in the event of the insured’s death. This softens the financial blow to any financial dependents of the insured. Beyond that there are a number of permutations that this article will let you know of.

The two broad areas of life insurance are term insurance and investment.

Term Life Insurance
Sometimes known as ‘protection-only’, when taking out a policy you will specify a fee, payable in the event of your death, and the length of time you want protection for. You will then pay a monthly fee for the cover.

Example: (Using ASDA Finance’s life insurance form) we specified a 45 year old man needing £50,000 worth of life cover, over 35 years on a single basis. The lowest price quoted for this was £21.45 a month. So, you’d pay this fee a month, and if you died during the 35 year term, your beneficiaries would receive £50,000.

A term such as this, which remains constant throughout, is normally referred to as level term.

Other types of term insurance
Decreasing term - This is a type of life insurance that decreases over the term of your mortgage, usually in line with your outstanding mortgage repayments. It is generally cheaper than term life insurance, although the monthly premium remains constant over the term.

Increasing term - This gives you the option to increase the sum of your cover annually by a certain amount or percentage, so it can protect you against inflation. This type of insurance is only available to those under 65, and you may need to provide evidence of good healthy.

Investment Life Insurance
This form of life insurance is sometimes known as life assurance or permanent life insurance. It is a policy that will cover for the eventual death of the insured, against an event that will happen.

Because these policies are not term limited, the premiums offered are often more expensive than with term life insurance, but they do guarantee a payout.

One of the most popular forms of investment life assurance is the endowment policy. This is essentially a savings scheme with the added bonus of life insurance and pays out a sum of money if you die within a certain period OR pays a sum of money out at the end of that agreed period if you survive.