The moment you start going through the process of getting life insurance quotes, you run into a big first hurdle. Whether you are face-to-face or online, there are several different types of policy on offer. Which one should you ask about? The reason for all this choice is there is no one-size fits all approach to financial planning. People earn more or less pay, they carry different levels of debt, their family are big and small, they are young and old, in good or bad health. The list is long. If you just make decisions based on price, i.e. you only ask about the cheap policies, you may not get good value. You should consider your age, whether you are in a stable relationship, how many children you have, your earning capacity and level of debt, your medical history and your family’s estimated future needs. Here is a simple explanation of the different term life policy types available.

Term Life buys what is usually a fixed amount of coverage payable over a fixed term of years. If you die within the term, the benefits are paid out. If you live longer, there is no pay out and you cannot recover any of the premiums you paid. This makes the policy rather like a bet on how long you think you will live. If the worst happens early in the term, i.e. only after a few instalments have been paid, your family will be winners. This is the cheapest form of policy and most people only consider it as a temporary measure if they cannot afford any of the other types. Remember, once the term ends, you have to qualify for a new policy. If your health is less good, this can pose a problem.

Decreasing Term Life. A conventional term life policy pays out a fixed amount. As the name suggests, this policy slowly reduces the amount payable on death over the term as your family’s need for security reduces. Say you take out a ten year policy but expect your financial situation to improve over this period, i.e. your debts to reduce and income increase, your children to complete their education, etc., you can opt for the amount payable to reduce in line with needs. Because the insurance company is less at risk as your life extends, this is the cheapest form of life insurance.

Renewable Term Life. The conventional term life policy is not renewable. It terminates at the end of the term. This policy gives you the automatic right to extend the policy when the term ends even though your health may have worsened over the period.

Convertible Term Life gives you the right to change a basic term life policy into one of the permanent policies such as Whole Life, Universal Life or Variable Life. This is the most convenient option because you and your family start with some cover even though your income is low. But, as your pay improves, you can upgrade the cover into one of the better policies.