Life Insurance: Which Policy Type?

Decreasing term, whole of life, level term, joint or single - there are a whole load of different kinds of life insurance out there and it can be confusing trying to work out exactly what you need.

Fed up with the jargon? Wondering where to look?

We've put this page together to answer all your questions - to describe very simply what each kind of policy does, who it's suitable for, and where you can find a good quote.

What do you need to know before you buy a life insurance policy?

There are a few really basic things you need to know and these include

• why you want the policy - to provide for your family, to pay off your mortgage, or for inheritance planning;
• how much cover you need;
• how long you'll need the cover for - all your life, or just till the children are grown up or the mortgage paid off?

You also need to understand the different types of life insurance that are available so that you can find the best one for your particular requirements.

What are the different types of policy?

Broadly, life insurance can be divided into two types:

• whole of life, and
• term insurance.

Term insurance in its turn can be broken down into two main types:

•  level term insurance, and 
• declining term insurance.

Policy	For how long	Details
Whole of life	For life	Insures you for the rest of your life, as long as you pay the premiums
Declining term life	To a particular date	The sum insured decreases as time goes on
Level term life	To a particular date	Level term - the sum insured remains the same

What are the different policy types when taking out life insurance?

When choosing life insurance you have to make a lot of important choices. You have to choose between different policy types to find what would best cover your needs. As the first big choice, you have to choose between:

• Term life insurance. Term insurance splits into two types: level term or decreasing insurance. If you choose a term insurance, once again you would have to choose between these two.
• Whole of life insurance. This insurance will pay out when the policyholders die.

Term life and whole life insurance	Details	Reviews
Term level	It guarantees that your loved ones get a payment if you die during a specific period of time. You will receive the same amount during a fixed period. Life insurance can be for 5,10, 20 years, etc., depending on your needs.	If you outlive after the term, your family will never have this sum, and neither will you. Cheaper than whole life insurance.
Term decreasing – also known as mortgage insurance	It guarantees that your loved ones get a payment if you die during a specific period of time. The amount decreases over the policy term. Really useful if you have a loan, as the price tends to decline over time.	If you took out a loan to buy a house, for example, it is a good policy to have.
Increase life insurance	Similar concept as decreasing life insurance, but with the premiums getting higher rather than lower	Not proposed by all providers
Whole life insurance	It covers you for your whole life. You pay a premium each month, and your loved ones will receive a fixed lump sum when you die. With this policy you are building a cash value that can be borrowed if needed.	Really protective insurance, as your family will receive a cash sum in all cases as long as you pay your premium. More expensive than others, such as term life insurance.

What is the difference between single and joint life policy type?

You can also choose between having a joint policy or a single policy depending your situation.

	Details	Reviews
Joint policy	Covers two people that are together by the same policy. At the end it is cheaper than two single policies. Covers both of your contributions to the family. Only pays out once. The sum will be given to the other partner if one dies. Leaves the surviving member of the couple without life insurance after the death of the first partner.	Cheaper than taking two single policies. Not really protective, as when one passes away, the other is no longer insured and will have to take out a single policy that will be at higher cost as they are now older.
Single policy	This kind of insurance pays for one person only. Pays out the amount chosen.	Taking out two policies is more expensive. You can choose the level you want, beneficial if the two partners don’t need to be insured at the same level. Much more protective than a joint policy because you are sure to have two pay-outs, and you are protected in case of a break-up.

What is family income benefit?

Family income benefit is another type of life insurance. You will receive a monthly payment from the moment you make the claim to the end of the policy. It can replace a lost salary, for example. It is helpful because it gives you a continuous amount of money instead of a lump sum. The payments start when the policyholders die and lasts until the end of cover. So if you took out a 20-year policy and die after 15 years, your loved ones will have 5 years of policy left.