Types of Life Insurance

Life insurance can help provide financial support to people who depend on you if you die. The right arrangement depends on what you want the cover to do, how long it is needed and what you can afford. Policy terms, exclusions and eligibility vary by insurer.

Term life insurance

Term cover runs for an agreed period. A valid claim is paid if the insured person dies during that term; if the term ends without a claim, the cover normally ends without a payout. These are the main ways the amount of term cover can be structured:

Level term

The cover amount stays the same during the term. It may suit a fixed debt or a lump sum you want to leave for dependants. Inflation can reduce the future buying power of a fixed payout. Explore Life Insurance.

Decreasing term

The cover amount reduces during the term. It is often considered alongside a repayment mortgage, where the outstanding balance is expected to fall over time. Check that the policy term and reduction pattern suit the commitment you want to protect. Read about Mortgage Protection Insurance.

Increasing term

The cover amount rises during the term, according to the policy’s rules. This can help address inflation, though premiums and the increase mechanism should be checked carefully against a level-cover alternative.

Other ways cover can be arranged

Family income benefit

Rather than a single lump sum, this form of term cover can provide regular payments to beneficiaries for the remainder of the policy term following a valid claim. The payment period therefore becomes shorter as the policy approaches its end. This may suit a family aiming to replace some ongoing income. See the Life Insurance overview.

Whole-of-life cover

Whole-of-life policies are intended to remain in force for life, subject to their terms and premiums being maintained. They can be considered for a payout whenever death occurs, including for estate or funeral planning. Costs and premium review terms can differ substantially, so compare the long-term commitment and any exclusions. See the Life Insurance overview.

Single or joint cover

A single policy covers one person. A joint policy covers two people and commonly pays once, usually after the first death, after which the policy ends. Two separate single policies may provide a payout on each insured life, but the cost and suitability will depend on the circumstances and policy terms. Consider what cover the surviving person would need afterwards.

How to compare the options

• List the people and commitments you want to protect, such as dependants, rent or a mortgage.
• Decide whether a lump sum or regular payments would better meet those needs.
• Choose a term that matches the period of financial dependency, or consider whether lifelong cover is genuinely needed.
• Check premiums, exclusions, health questions and what happens if payments stop.
• Review existing workplace or personal cover before replacing it.

There is no single best policy for everyone. An adviser can discuss available options in light of your circumstances; any recommendation and quote depend on insurer assessment and policy terms.