What are the different types of life insurance?

Level-term life insurance pays out a set amount of money if you die while the policy is in place. It is often called family life insurance.

The payout remains constant throughout the policy's duration, as do the premiums. Typically the younger and healthier you are when you take out the policy, the lower your premiums will be.

The predictability of the payout is a significant advantage of this type of policy. The downside is that this insurance can be more expensive than other types, and payouts may not be adjusted for inflation.

Term life insurance is a policy with a set expiration date. It's designed to cover specific periods when financial obligations are at their peak, such as while raising a family or paying off a mortgage.

For example, you could get a term life insurance policy that cover a period of 15 or 20 years while your children are minors, so that if you die within this period the policy will pay out a sum of money that can be used to take care of them in your absence.

Decreasing term life insurance is also known as mortgage life insurance. Its payout decreases over time in line with your mortgage balance.

Premiums are generally cheaper than for level-term policies, but its not suitable for all mortgage types.

Increasing term life insurance accounts for inflation, with the payout increasing annually.

This means higher payouts, but also makes it more expensive than level or decreasing term insurance.

Joint life insurance covers both halves of a couple but only pays out after the first death. It can be more affordable than two separate policies if you and your partner are considered low risk by insurers.

However, you will need to alter the policy if you and your partner split up or get divorced.

Whole of life insurance, also referred to as life assurance, offers lifelong cover and guarantees a payout regardless of when you pass away, as long as you have consistently paid your premiums.

It is almost always more expensive than term policies. There are different types of whole of life insurance, including:

• balanced cover, which has fixed premiums

• maximum cover, which has variable premiums based on investment performance

Over-50s life insurance policies is geared towards older individuals who are likely to be charged very high premiums if they take out standard life insurance.

It offers a guaranteed payout regardless of when you die (as long as you consistently pay your premiums) and also guaranteed acceptance without medical exams. It is therefore suitable for people with pre-existing health conditions.

There is a risk with these types of policies that the amount it pays out may be less than you paid in.