Term Insurance

The main type of life insurance is term life, which provides a cash lump sum in the event of your death. It is probably the most economical form of life insurance and you can stop the policy at any time. Term insurance usually requires you to undergo a medical examination and sometimes an AIDS test and it is renewed each year with your insurer.

Calculating the amount of cover you need depends on you and your insurer. Some work on the amount your dependants will need each year. But the policy you select determines the premiums you pay. Term life insurance is not tax deductible, although the payout is free of tax. Premiums generally increase each year as you get older.

Most policies will pay out on death from illness. The only exception is suicide, with policies containing an exclusion if you die by this method. If your death is accidental, the payout is immediate.

The premiums are determined according to a number of factors including your life expectancy, whether you smoke, your gender and your occupation.

For example, if you are a non-smoking woman you will pay less than your smoking counterpart and any man regardless of his smoking habits.