Glossary

Term insurance

Also called term plan, pure protection.

Pure life cover for a fixed period. Pays out if you die during the term, and pays nothing if you outlive it.

Term insurance is life cover with no savings element. You choose an amount of cover and a period; if you die within that period the sum assured is paid to your nominee, and if you outlive it the policy simply ends.

Because the whole premium buys risk cover rather than being split between cover and a fund, it is the cheapest way to buy a large amount of cover. The absence of a maturity value is not a defect — it is the reason for the price.

Related terms

  • Sum assured The amount the insurer pays on a valid claim. The headline cover figure a policy is described by.
  • Policy term How long the cover lasts. Distinct from how long you pay for it.
  • Endowment policy Life cover combined with a contractual payout at maturity, whether or not a claim is made.

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