Term assurance
A Term assurance policy will normally provide an amount of cover in the form of a lump sum or income benefit which is payable on death within a period that is determined at outset.
Term policies offering a lump sum benefit, can either be level or decreasing. A level policy simply means the sum assured remains 'level throughout the term of the policy.
If you die on the first day of the policy, you get exactly the same sum as you would if you died near the end of the policy.
A decreasing term assurance policy on the other hand, will pay out more at the beginning of the policy than it would at the end.
Term assurance and family income benefit policies have no element of saving and cannot therefore be surrendered to provide a cash lump sum. They are pure protection policies that pay out on death but lapse without value if death does not occur during the term of the policy. As a result, they are normally the cheapest form of life assurance.
Family Income Benefit
This is an alternative to a level term life assurance policy. Instead of providing a single lump sum payment on death, it pays a regular income over a specified number of years following the death of the breadwinner to cover, for example, the period whilst the children are growing up. The level of income paid relates to the size of the premiums. Because the benefits from such policies are only payable for a certain term, premiums for such policies can be relatively cheap.
