Term Assurance explained and available help from Shire Direct

So in this article, we take a look at the two main different types of Term Assurance - 'Level Term Assurance' and 'Decreasing Term Assurance', and provide details of how we can help with Term Assurance and Mortgage facilities!

Table of Contents:

What is Term Assurance?

So, Term Assurance, what is it exactly? Well, just to recap then, Term Assurance is a life insurance policy that will pay the sum assured in the event of the premature death of the policyholder within a specified period. There is no investment element associated with Term Assurance policies.

There are two main types of Term Assurance policies:

We'll go onto look at these below.

Level Term Assurance explained

This type of insurance policy covers the policyholder on the basis that neither the sum assured nor the premiums will alter during the term of the contract. This type of policy is usually used to protect loved ones in the event of premature death. In the case of joint applicants, the policy is normally written on a joint-life, first-death basis.

For example, John Smith and his wife Jill have a 25-year mortgage of £100,000 and wish to ensure that the mortgage is repaid in the event of either one of them dying prematurely. The Level Term policy in this instance would have:

Example Level Term Assurance Policy:
Sum Assured:	£100,000
Term:	25 years
Lives Insured:	John Smith and Jill Smith
Monthly Premium:	£45.00

Thus, in the event that either John or Jill died before the end of the 25 year mortgage term, the policy would pay a lump sum of £100,000. The policy would end on payment of the sum assured of the first death.

If the mortgage was relatively new, then it's likely that the entire sum assured would be needed to pay-off the mortgage balance. This would also be the case if their borrowings had been arranged on an interest only basis.

However, if the mortgage was capital repayment, then the sum assured would not only cover the outstanding mortgage balance, but would also pay the difference to the surviving spouse in the event the mortgage balance was less than the sum assured. For instance, if the mortgage balance had reduced to £22,000, the surviving spouse would receive a further £78,000 to help towards maintaining their lifestyle.

Decreasing Term Assurance explained

Decreasing Term insurance policies cover the policyholder on the basis that the sum assured will diminish over the mortgage period, although the premiums remain the same during the term of the contract. This type of policy is usually used to protect loved ones in the event of premature death. In the case of joint applicants, the policy is normally written on a joint-life, first-death basis.

For example, James Jones and his wife June Jones have a 25 year mortgage of £100,000 and wish to ensure that the outstanding mortgage is repaid in the event of either one of them dying prematurely. The Decreasing Term Assurance policy in this instance would be:

Example Decreasing Term Assurance Policy:
Sum Assured:	£100,000 on a reducing basis
Term:	25 years
Lives Insured:	James Jones and June Jones
Monthly Premium:	£33.00

Thus, in the event that either James or June died before the end of the 25 year mortgage term, the policy would pay a lump sum equivalent to their remaining repayment mortgage balance. The policy would end on payment of the sum assured of the first death.

If the mortgage was relatively new, then it's likely that the entire sum assured would be needed to pay-off the mortgage balance. As the mortgage has been arranged on a Capital Repayment basis, then the sum assured will only cover the outstanding mortgage balance. There will be no additional payment up to the original £100,000 level if the mortgage balance was only £22,000.

Clearly, if you have an interest only mortgage, then Decreasing Term Assurance will not be suitable for you, as your mortgage will not decrease over time, in this case you would need to protect your loved ones with a Level Term Assurance policy, that will provide a lump sum to cover the full amount of your mortgage for the full term.

Can Shire Direct help me with term assurance / life insurance, and can you help me with a mortgage?

Yes, absolutely!

As part of our factfinding procedures, a professionally qualified Shire Direct Advisor will examine any present arrangements you may have, together with the level of the insurance protection you require. The Advisor will then make a recommendation accordingly in a statement of insurance demands and needs.

Advice and Service always come first at Shire Direct

We've said it before, and we'll say it again, advice and service ALWAYS come first at Shire Direct. Arranging a mortgage and protection is crucial, afterall a Mortgage is typically the largest financial transaction that most people will ever enter into, so it's really important to get things right at the outset. We'll examine your circumstances, needs, requirements and aspirations to come up with the most appropriate solution for you.

For more term assurance / life insurance information, and/or a rapid in-principle decision why not get in touch?!

Yes, for a rapid in-principle decision or further help and information why not Contact Us?

You'll find a warm welcome awaits you, and our service to be friendly, helpful and thoroughly professional. We have the approach, the skills and the products to help even in the trickiest of circumstances.

So call us today on Freephone 08000 282 281 (lines open 8am until 10pm everyday, including weekends), or if you prefer you can also enquire online at any time! In either case, we'd love to hear from you and will be delighted to help in any way we can!

So, that's the two main different types of Term Assurance, Level Term Assurance and Decreasing Term Assurance. We hope you found this information to be helpful. Don't forget there is a wealth of mortgage and mortgage related information throughout our website which you may also find useful, so why not take some time out to explore some of the possibilities that may be available to you, and remember we're only ever a free telephone call or couple of mouse clicks away!

Enquire Online now, or call us today 08000 282 281 - our freephone lines are open 8am-10pm everyday! We'd love to hear from you!

The overall cost for comparison is 9.8% APR.
The actual rate available will depend upon your circumstances. Ask for a personalised illustration. APR variable and based on a usual case. Most customers are likely to receive a lower rate or the same rate as our overall cost for comparison rate - learn more about APR.

There are no upfront broker fees.
However, a fee may be charged on successful completion. An indication is that on conforming cases (straightforward applications with no or minimal adverse credit) a fee may be charged of up to 1% of the amount advanced, typically £795 and will depend on your circumstances.
For non-conforming cases (where case research and processing may be more complex due to adverse credit or unusual circumstances), a fee may be charged of up to 3% of the amount advanced, typically £1,995.

THINK CAREFULLY BEFORE
SECURING OTHER DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED
IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.

Adding existing debt to your mortgage will increase the repayment term and overall cost.

^ Return to the top of our Term Assurance explanation