Money Matters Team

Types of life insurance cover

By Money Matters Team 06/03/2013

Life insurance is about planning ahead...

Find out more about the different kinds of protection...

Thinking of our dependents is important. Life insurance, whether with level, decreasing or critical illness cover, could help your family deal with any sudden change in their finances.

Here is a brief summary of each type of cover:

Level term

The word level means the amount paid will be set from the date that the policy is taken out. If the policyholder dies within a specified period of time (the term), the cover is designed to help ensure loved ones will receive a pre-determined sum. When policyholders take out the policy, they can choose the term they would like cover for.

Prospective policyholders can think about what sum might be required by those they leave behind. This sum could help to pay for children's education or household bills.

Mortgage decreasing term

Borrowing money to pay for a house, otherwise known as a mortgage, is one of the most expensive items we'll purchase in our lifetime. Mortgage decreasing term insurance is designed to help family left behind pay off any remaining mortgage repayments.  

The cover amount reduces roughly in line with the remaining mortgage debt. Usually, cover can pay out enough to cover any remaining repayments if the policyholder dies during the policy term.

Critical illness cover

Critical illnesses such as cancer, heart attack or stroke can have a debilitating impact on your ability to work and, of course, your ability to earn.

Critical illness policies are designed to pay a cash sum should the policyholder die or be diagnosed with a specified critical illness during the policy term. If the policyholder becomes terminally ill and provided that certain definitions are met policies can typically pay out. There can be some exceptions where the policy is due to come to an end.

The cash sum could help to pay your mortgage, private medical treatment or simply help to maintain your family's lifestyle during this difficult time.

Ultimately, life insurance is about planning ahead and it could be a sensible way to help protect your family from financial issues if you were no longer with them. This might include household bills, child-care costs, university fees and mortgage payments.

This Money Matters post aims to be informative and engaging. Though it may include tips and information, it does not constitute advice and should not be used as a basis for any financial decisions. Sainsbury's Bank accepts no responsibility for the opinions and views of external contributors and the content of external websites included within this post. Some links may take you to another Sainsbury's Bank page. All information in this post was correct at date of publication.