Term insurance gives you temporary cover for a specified length of time known as the "term". This could be ten, fifteen or twenty years although you can arrange cover for as little as one month. Its main advantage is that it is very cheap compared to other types of life insurance, the downside is that if you are still alive at the end of the term, no payment is made.
Renewable term assurance allows you (usually after five years) to take out a further term policy without the need for any further evidence of health, providing the policy term does not exceed age 65.
Convertible term insurance enables you to convert the policy into a whole of life or endowment insurance - without evidence of health.
Decreasing term insurance diminishes by a fixed amount each year, reducing to zero cover at the end of the term. These policies are often used to cover a mortgage or other decreasing loan so that any outstanding repayment will be paid if you die before the end of the term. It's also used to protect individuals against inheritance tax on potentially exempt transfers (PETs)- gifts which are not subject to inheritance tax providing the donor survives seven years from the date of the making the gift.
PETs benefit from diminishing inheritance tax over a period of seven years (referred to as taper relief). But as with all term insurance, nothing will be paid if you survive the term.
Increasing term insurance increases each year by a fixed percentage of the original sum insured.
Family income benefit will provide your dependants with a regular income for the rest of the term if you die before expiry. The income can be paid monthly, quarterly or annually. Some of the policies increase by a set amount each year - typically three percent or five percent.
By contrast, whole of life insurance pays a lump sum to your dependants whenever you die, so there will definitely be a payout but this makes it much more expensive.
When you reach a specified age - say 70 or 80 - premiums may cease but the cover will continue. The policy is then referred to as "paid up."
Endowment insurance is a mixture of term insurance and a savings plan - usually invested in a with profits fund. Best known as being sold to repay mortgages they aim to pay out the guaranteed sum insured, plus any surplus from good investment returns.
You pay premiums for an agreed term - usually ten, fifteen, twenty or twenty-five years at the end of which you receive a lump sum. Reversionary bonuses are locked into the policy's value each year and a terminal bonus on maturity.
If you die before the policy matures, the sum insured plus any declared bonuses will be paid to your dependants.
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