What's Term life insurance?

Term life is a relatively cheap form of life insurance and has become the cornerstone of personal risk management. It protects a family financially if the insured person dies prematurely. Term life allows the insured person to purchase life cover for the period of time that meets their needs. Hence 'term.'

This type of insurance has advantages for younger people, who may need substantial cover, as the initial premiums are quite low. The need for life cover is highest when people have a large mortgage, little in the way of other resources to fall back on, and dependents.

Older couples have less need for life insurance as they pay off the mortgage, build up investments, and their children grow up and leave home. However, with the increasing occurrence of relationship break-ups and ‘blended’ families, some older people are taking on mortgages and may need term life insurance.

People usually choose a term insurance policy because it offers substantial benefits at a relatively low cost. However, this is usually only the case for a limited time, generally while the insured person is young and healthy. More than 70 per cent of all term life insurance policies terminate before a claim is paid – that is, the insured person

cancels their policy prior to dying or becoming terminally ill.