Find out exactly what term life insurance is and how much your premium will be in this guide.
Term life insurance is something we’ve all heard in conversation. But, what actually is it? And more importantly, how much can you expect to pay for a term life insurance policy?
In this guide, we’ll take you through the various different types of term life insurance on offer. We’ll also explain how much you can expect to pay for a policy, what term life insurance actually covers you for and the lifestyle factors that will affect the price of a premium. Scroll on to learn more.
What is term life insurance?
Term insurance is valid for an agreed period of time (or ‘term’). This is usually an age at which you wish the policy to expire and is agreed between both the policyholder and the insurance provider. For instance, if you take out a term life insurance policy in your early 20s and wish for it to expire when you turn 80, you’ll be covered up until your 80th birthday. If you were to die before turning 80, the policy will pay out. If not, it expires.
How do the different term life insurance policies work?
There are three types of term life insurance. These are:
Increasing term life insurance
In order to find out which is the right fit for you, let’s explore the different types of term life insurance in a bit more detail.
If you’re responsible for mortgage repayments, decreasing term life insurance is an affordable option that makes sense. It generally has one of the lowest premiums, making it an ideal choice for tighter budgets. Decreasing-term life insurance covers any outstanding debts you have if you die while the policy is still active.
Decreasing-term, simply put, means that the amount the policy pays out reduces as the outstanding balance of your financial commitments decreases. The main reason a person would take out this type of policy is to ensure any financial obligations(including mortgage repayments) are not left to your survivors.
Level term life insurance pays out a fixed lump sum agreed between the policyholder and the insurance provider. This amount stays the same throughout the duration of the policy. This option offers a security net for all different types of people.
Level-term life insurance guarantees your beneficiaries will receive a specific sum should you die during the policy’s agreed term.
Increasing Term Life Insurance
Increasing-term life insurance provides a lump sum payout that increases annually by a fixed amount. The yearly increases continue for the duration of the policy.
This type of term life insurance generally is best for anyone wanting to protect their policy’s value. It helps your policy maintain its worth in line with inflation.
What do term life insurance policies cover?
Generally, term life insurance policies will pay out a lump sum in the event of your death. This is awarded to your survivors and helps to support them financially and covers any outstanding debts you leave behind.
Term life insurance policies work the same way as all life insurance policies. They pay out in the event of your death providing you die during the agreed term (policy duration). Life insurance pay-outs are a financial safety net. They help with day to day living costs such as mortgage repayments and they can leave an inheritance behind for your loved ones.
Term-life insurance is a very important investment. Which is why choosing the right policy for your needs is essential. As is deciding what you want your term to be.
How much does term life insurance cost?
Term life insurance typically costs between £15 and £30 per month. That said, premiums can be as low as £5 per month in some cases and they can rise as high as £100+ per month. As with everything, there are several defining factors that will impact the price of your term life insurance policy.
Let’s take a closer look at what affects the price of insurance premiums.
What factors affect the price of a term life insurance policy?
The cost of your term life insurance premium is generally dictated by your personal circumstances. This, as well as the level of cover required and the length of time you wish the policy to last. There are a number of factors that will impact the price of your term life insurance policy. These include:
Usually, the older you are the more expensive a term life insurance policy is likely to be. That’s generally the case with all types of life insurance.
Overall health. Your medical history also significantly impacts your term life insurance policy fees. For those who have already been diagnosed with an underlying health issue, a policy is likely to be much pricier. And, in some cases it won’t be available at all.
Smoking status. If you smoke, are an ex-smoker or vape, life insurance is always going to be more expensive. There are a few specialist insurers that regard vapers as non-smokers. But, they are few and far between.
Height and weight. Insurers use your height and weight to calculate your BMI. If you are considered overweight, your premium prices are always going to be higher than those with a healthy weight at the time the policy is taken out.
Other things that impact the cost of a term life insurance policy include the length of the policy and the level of cover. The longer you want a policy to last impacts the price. The level of cover you require does too. Consider how much you want and need the policy to pay out.
Why secure life insurance with Life Expert
At Life Expert, we deliver quotes from our panel of insurers. We’ll also help you to conduct a full comparison between the best term life insurance options to suit your needs. All of our quotes are completely personalised. Plus, our experts are always on hand to help guide you through the entire purchasing process.
