What is term assurance?
Term assurance is a pure life insurance policy regulated by the FCA. You pay a monthly premium for a fixed term (commonly 20 to 35 years). If you die during the term, the insurer pays your beneficiaries the agreed sum. If you survive, the policy ends with nothing. Level term pays the same sum throughout, decreasing term reduces in line with a repayment mortgage, and family income benefit pays a monthly income rather than a lump sum. Putting the policy in trust keeps the payout outside your estate for IHT purposes.
A healthy 32-year-old non-smoker can buy £400,000 of level term cover over 25 years for roughly £12 a month. The same person bundling life cover into a whole-of-life or savings-linked policy could pay £80 to £150 a month for less effective cover. Over 25 years that is £20,000+ of premiums saved, which invested in a Stocks and Shares ISA at 7% real would itself be worth around £55,000.
Skipping the trust. If your £400,000 payout falls into your estate and pushes you over the IHT threshold, HMRC takes 40% of the excess. Most insurers will put a policy in trust for free at application; ask.
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