Term assurance policies run for a set number of years, or ‘term’. They’re a kind of protection insurance, paid to your family or financial dependents if you die during the term.
You can have a term assurance policy for your own life, jointly with a partner or on the life of someone else with whom you share a financial interest, like a spouse or business partner.
Individual policies only pay out if the holder dies within the term. If you survive past that term, your family or dependents won’t receive anything. Joint policies pay out in full and then finish when the first of the two policyholders dies. Joint life policies cover two people, but only pay out once. Usually, this is a lump sum payment to the survivor after the first person dies within the term of a policy. When the policy ends, there's no further life cover for the survivor.
If you already hold a policy, you’ll probably find that the premiums haven’t changed since it began. That’s because premiums usually stay the same for the full term of the policy.
In some cases they might be reviewed every five years or so to make sure they still offer the cover you need. When that happens, the premiums can go up or down, but you’ll always be told if they need to change.
The premium you pay will depend on your age and health, as well as the amount of cover you want and the length of the term. Premiums will be higher if you’re older, in poor health or have habits — smoking, for example — that could increase the risk that you’ll die within the term.
You’ll normally pay premiums every 30 days. If you miss a payment, your policy will usually end, leaving you without cover. Don’t worry if that happens accidentally, you can usually re-start your policy if you act within 13 months.
You’ll have to catch up on missed premiums, and you’ll probably also have to provide a new medical underwriting assessment of your health. It’s important to remember that policies can’t be restarted if you leave them unpaid for more than 13 months.
Your policy only pays out if you or your joint policyholder dies. You can’t surrender or cash it in if you change your mind. If you haven’t already started a term assurance policy, we recommend that you take financial advice to make sure it’s right for you.
