Level Term Assurance
This is often combined with an interest only mortgage or used alone to provide a fixed amount for family protection purposes. The plans are straightforward and simple to understand. They are set up for a fixed period of time and in general the premium and the amount payable remain fixed throughout the term. This type of lump protection is liable to inheritance tax and is only guaranteed to be tax free if written in trust.
Decreasing Term Assurance
This is the cheapest form of cover and is often known as mortgage protection. The sum assured decreases over the term of the plan and this decreasing cover keeps the premium to a minimum. It is a very valuable option in association with a repayment mortgage or to cover loans or even large gifts for inheritance tax purposes.
