If you’re looking for simple straightforward life assurance, Term Assurance means you get the benefit of total protection for a limited period of time with absolutely no element of investment involved. For this reason, it is also the least expensive type of insurance.

The ideal product that meets the need for protection against premature death is Term Assurance. It is, in essence, a policy that provides cover over a certain amount of time – and this is called the policy term.

Usually, the cost of the premium for this particular item is quite low; however, you may find that it contains a high expense loading and an allowance for adverse selection.

Term Assurance can be used both for your family and for your own personal protection, as well as for a wide range of business scenarios. The reasons you might want to use it in business includes key person insurance, which protects your business against loss of profit in the circumstance of the death of a key member of the organisation, and partnership insurance schemes or enterprises, which enable the buyout of a deceased partner’s share(s).

This style of assurance provides the person with life cover for a previously agreed period of time. Should the policyholder die during this time, the policy will pay out a lump sum, thus providing a safety net or level of security for those dependent on the individual.

Key Features of Term Assurance

• The term of the policy can range from anything from a few months to 40 years or more; but for terms that end after the age of 65, it may be advisable to take out a whole-of-life policy instead.
• The assured sum is payable only if the death of the assured party occurs within a specified period of time (the term).
• If the life assured party survives the full term covered, the cover then ceases and there is no return of premiums.
• There is no surrender value or cash-in value at any point during the term.
• If premiums are not paid within a certain time after the due date (normally 30 days) the policy lapses, and the cover ceases and has no value. Most organizations will allow reinstatement of payments within 12 months, provided that all outstanding premiums are paid up to date and evidence of continuing good health is provided.
• Normally, premiums are paid annually or monthly, although a single premium payment (a sole payment to cover the entire term assured) is also permitted.
• Premiums are usually ‘level’, so the same amount is paid each month or year, even if the assured sum varies across different years.