Financial Services > Life lnsurance > Questions > Types of Insurance

Types of Insurance

What different kinds of life insurance are there?

The two major types of life insurance are protection only (term), and investment type (whole of life). Please view our advice guide for more information about the different types of term and whole life policies which are available.

Why is term insurance sometimes called temporary insurance?

This is because it is arranged over a fixed time period, which has to end on expiry, rather than than over your whole life.

What is the difference between increasing term and increasable term life insurance?

These two policy types are similar, in that both make allowances for the increased costs you may wish to cover for over the period of a policy.

Increasing term automatically raises the premiums by a pre-set amount. This may be a fixed percentage each year, or it may be set according to current levels of inflation.

With an increasable term policy, you have the option of increasing your premiums at certain times, such as on the anniversary of policy, or when and certain events take place.

With both policies, the amount covered will increase in proportion to the premium. For example, if you have a policy for £100,000, and you increase your payments by 5%, your cover will also increase by 5% to £105,000.

Is there also decreasing term life insurance? Why might I want this?

Yes, a decreasing term life-insurance policy allows you to reduce your premiums over a period of time, resulting in a smaller benefit being payable. This may be useful to if you are taking out a life insurance policy to protect your mortgage payments, as the amount you owe your bank or building society will reduce each month throughout the term.

Is it possible to have my life insurance policy pay out a continuous monthly income, rather than a lump sum?

Yes, this is usually done in the form of a family income benefit policy. This allows you to have an insurance policy which will pay your family a monthly sum to replace your wages in the event of your death, or your becoming seriously ill. These policies often have lower premiums than lump sum type policies, as the payouts are made over a period of time, rather than the insurer having to pay out instantly.