Purely for your peace of mind

Term assurance is best used when taking out a loan or mortgage to provide a capital sum

WHEN most us talk about life insurance, we usually mean with-profits endowment policies. Many people don't realise these are a conservative form of investment, writes Tony Lyons.

We pay our premiums on a regular basis, expecting after 10, 15, 20 or 25 years to collect a lump sum made up of the sum assured - the minimum guaranteed to be paid on premature death - and the bonuses that have been attached to the policy over the years.

There are better ways of building up a nest egg and you can buy life insurance that offers pure protection, with no investment element at all. The premiums are much cheaper than they are on with-profits policies. Called term assurance, these policies will give no pay-out at all except in the case of death. If you survive to the end of the term, you get nothing back except the satisfaction that your family and dependants would have been protected against financial hardship if you had died.

Term assurance is best used when taking out a loan or mortgage to provide a capital sum. Or it could be used just for peace of mind. To give an idea of cost, a 30-year-old male non-smoker could expect to pay around pounds 5 and pounds 7 a month for a sum assured of pounds 50,000 over 20 years with level- term assurance.

Women have a longer life expectancy than men, so pay less - between pounds 4 and pounds 6 a month for the same sum insured. Premiums increase significantly with age. A 50-year-old male non-smoker should expect to pay between pounds 16 and pounds 22 for the same sum assured over 10 years. A woman should expect to pay pounds 4 to pounds 5 a month less.

Some of the most competitive rates are offered by Equitable Life, which is usually the cheapest company in the market, Eagle Star, Legal & General, Scottish Widows, Virgin Direct and Standard Life.

The market for term assurance is competitive and premiums fluctuate. An independent financial adviser will tell you the best rates, or check the papers for low-cost firms that sell insurance direct to the public.