The easiest way to explain the differences between the cover is to provide you with an example of the potential cost of having the policy. The table below shows the basic monthly premium that could be available to a 30 year old non-smoker:
|Type of Cover||Example Sum Assured||Example Policy Term||Potential Monthly Premium*|
|Level Life||£250,000.00||35 years||£14.31|
|Decreasing Life||£250,000.00||35 years||£10.85|
|Increasing Life||£250,000.00||35 years||£14.69|
|Whole of Life||£15,000.00||No end date||£8.01|
|Whole of Life||£250,000.00||No end date||£84.56|
Premiums based on being accepted standard terms.
The base premiums above are assuming that your application will be pretty clear cut, with no significant medical history or hazardous occupation to declare. Where an insurer feels that your application contains significant disclosures you may find that the policy premiums are increased.
The most significant comparison in the table is that of Whole of Life cover compared to the others available. Whilst the monthly premium is much higher or sum assured much lower, it is the only plan that is guaranteed to pay out one day (as long as premiums are kept up), as there is no end date.
The premium difference between Level and Increasing Life Insurances is somewhat negligible. If you do opt for the Increasing Life Insurance your decision is not set in stone as you are able to decline the RPI linking each year, if you wish to do so. A Decreasing Life Insurance will usually be the cheapest option, when you consider the sum assured on offer, as the insurer knows that the potential risk of them making a large financial payout in a claim reduces each year.
With any Life Insurance policy your primary focus should be upon taking out the cover that suits your needs and concerns for future financial planning. If you are unsure as to which Life Insurance type is the right option for you please feel free to speak to one of our insurance advisers for a no-obligation quote.
*Research conducted as of 12th June 2014
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