This is the simplest form of Life cover, where the life assured pays a premium to the life office, who agree to pay out a certain sum if the insured dies before a certain date. If the policyholder survives throughout the term, the policy normally lapses with no value. These policies are usually inexpensive and provide useful protection for those who would benefit from the policy proceeds, such as family members or business partners, if the policyholder dies. The proceeds could also be used to repay a mortgage or other debt.
Some protection policies also provide an investment element as well as the protection of life cover. Premiums are paid into the policy and, once the cost of insurance cover has been taken into account, money is invested, so that the policyholder or other beneficiary can benefit from an investment value, particularly if the policyholder survives to the end of the policy term.
Regular premiums are paid into the policy and when the Endowment term ends, a lump sum is paid out. Most Endowments have a life cover element, in order that the lump sum can become payable should the policyholder die during the policy term.
Whole of Life Policies
These can be similar to Term Assurance, except that the policy is designed to provide life cover for the whole of the insured's life rather than just a set term. Whole of Life policies are more expensive than Term Assurance policies, because the company is sure that there will be a claim at some point. These policies are designed to protect estates and businesses, where liabilities may be of a long term nature, such as potential inheritance tax (IHT).