It can be difficult to choose between the different kinds of life insurance available to buy. The AA offers two types, both provided by Legal & General, each with a specific purpose in mind:
1. Family life insurance
2. Mortgage life insurance
Neither offers superior protection over the other, so when deciding between them you should think about what you want to help protect.
Level term insurance is often used for family protection. As with all term insurance it's flexible – you choose the amount of cover you need and how long you would like the policy to run. It gives you peace of mind, as you know the cover will not decrease and will always pay out the same amount, unless you alter your policy.
All our policies come with a number of extra benefits at no extra charge, including terminal illness cover and accidental death benefit, covering you if you die within 90 days following an accident. Please read the Key Features document for more information.
You can also choose to put any of our policies in trust. You decide who'll receive the proceeds of your life insurance policy, and placing the plan in trust removes the need for probate, so your loved ones benefit more quickly. Placing a life insurance policy in trust can also help protect against inheritance tax.
Mortgage life insurance policies have a clear use, to help pay off an outstanding mortgage or loan in the event of your death during the length of the policy. Taking out a mortgage protection policy could mean that in the event of your death your family could stay in the family home and not have to worry about paying off the outstanding mortgage. You can choose between two types of policies when taking this out:
Mortgage Decreasing Term insurance means that the cash sum that the policy will pay out decreases over time – roughly in line with a repayment mortgage or loan. The idea is that the amount of cover decreases alongside the remaining mortgage debt.
A Mortgage Term insurance policy has a cash sum that does not decrease. The sum it pays out remains level while the policy is running.
The graph below illustrates the differences between the cash sum for Level and Decreasing Term Assurance based on an example with an amount of cover, of £100,000.
This illustrated the amount of cover: Level Term insurance and Decreasing Term insurance would provide over the same period of time. We've based this graph on £100,000 over 25 years.
This is an illustration only. Your amount of cover will depend on your individual circumstances.
Some mortgage protection insurance plans include extras that are specifically tailored to meet the needs of people who are moving house. AA Mortgage Life Insurance, provided by Legal & General, provides the following:
You can have more than one life insurance policy, so you might decide to take out a policy that helps to cover your mortgage and a separate one that protects your family. Or you could choose a life insurance policy that protects both.