Term Assurance

A term assurance plan is the next level of life assurance up from mortgage protection. It also forms the basis upon which most other life assurance products are based.

This is a policy that will provide you with a set level of death benefit over a specific term. The level of cover will not decrease over time. It may even increase if you select some of the optional benefits that can be taken out with your policy – Indexation increases the cover every year in line with inflation and the conversion option (Convertible Term Assurance) is a relatively cheap, but very valuable option, that allows you to change the policy to another policy without providing any further medical evidence or answering any more medical questions.

Why would I need it?

The most frequent call for term assurance over the last few years has been as cover for an interest-only home loan or mortgage. The balance of an interest-only loan does not decrease every month or year, and as such, you would need to have a life assurance policy that will always pay out the full loan amount. E.g. loan starts @ €400,000 – after 5 years it will still be €400,000.

You may also have taken out or need to start a level or convertible term plan as second level life cover to ensure your family is covered in the event of the premature death of one or both of the income earners.

Pricing

A level term or convertible term plan will cost marginally more than a mortgage protection policy. Again, it can be quite safe to select a term assurance provider based on whichever is cheapest, however the optional benefits that life assurance companies offer can differ from company to company.