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Level Term Assurance


What is it?

Level term assurance policies have a known level of cover that will be paid out in the event of death within a known period of time. Premiums remain level throughout and should you survive the policy term, there will be no benefit. As this type of contract only provides cover in the event of death there is no surrender value, so if you stop paying the premiums at any time, your cover will cease.

Premiums are based on your personal circumstances but the main areas for consideration by an insurer are your age and state of health. The older you are, the higher the premium will be. Similarly if you have or had a serious ailment the insurer may seek to charge you more or in some cases be unwilling to cover you at all. Higher levels of cover and longer policy terms all increase cost as will the fact that an individual smokes.

Essentially, level term assurance is cheap cover on your life for the benefit of your family or for your business, but there are limitations to it.

As it is a fixed term, there is no flexibility and you will be unable to increase cover or extend the term. Should you therefore find yourself ill at the end of the term you may be unable to obtain further cover. Some policies allow you to increase the level of cover in certain specific circumstances under a guaranteed insurability option and this will be detailed in the individual product Key Features Document.

There is no investment element to the policy, and your sum assured will take no account of inflation.

Eligibility

You must be aged 18 to take out a life assurance contract.

Taxation

The proceeds of the policy will be paid out free of income or capital gains tax. A trust may be used to ensure the proceeds of the policy are paid to your chosen beneficiaries and to avoid being included in your estate for inheritance tax purposes.

Risk Considerations

There are a number of risk considerations that need to be taken into account. It is important that you are aware of these in relation to your particular circumstances.

  • If you stop paying premiums your cover will cease.
  • As the plan is for protection rather than investment it will not have a surrender value.
  • Failure to disclose any requested or relevant information may affect any claim.
  • You may have to increase contributions to maintain your desired level of cover or reduce cover to maintain your chosen level of contribution.

 

  • At the end of the term selected, cover will cease and no further benefit will be payable