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Often the last thing we consider when things are going well is what might happen if things were to change, such as what would happen to your nearest and dearest if you weren't around. Of course, it's an uncomfortable subject to talk about, but like most important matters, it's one that you can't afford to ignore.

Life insurance and critical illness cover insures the responsibility you have towards your loved ones continues even if the worst should happen. It is a form of insurance you take out that agrees to pay a fixed amount to your beneficiaries should you die during the period the policy is in force. Paying out a cash sum in the event of your death or a critical illness, the money can be used to provide for your family or pay off your mortgage.

There are many different types of cover, but two of the commonest types are explained below.

Level Term Assurance

This is the most basic type of life insurance. In return for relatively low monthly payments, the policy guarantees an agreed amount of life cover (also known as the sum assured) over a fixed term - often the mortgage period. It is commonly used to cover interest-only mortgages, where the capital owed remains constant throughout the mortgage term. The lump sum is paid out if death occurs before the policy ends. Term assurance has no surrender value after the policy has ended.

Decreasing Term Assurance

With decreasing term assurance, instead of the life cover staying at the same level it reduces over the life of the policy and only pays out if death occurs before the policy ends. This type of cover is popular among those taking out repayment mortgages, as the sum assured reduces roughly in line with the amount of capital owed on the mortgage through time. So if death should occur before the period ends, the policy pays out a proportion of the sum originally assured, which should be enough to pay off the amount of capital still owed to the lender.

Convertible Term Assurance

Term assurance can be converted into permanent cover after the original policy comes to an end, usually by buying whole-of-life insurance or an endowment policy. You cannot be refused the right to take out a new policy regardless of the state of your health. But there are a number of rules. You can't increase the sum assured when you convert; you must convert before your term assurance ends; the new premiums will be determined by your age and sex so they will be more expensive.

Increasing Term Assurance

The sum assured increases during the policy's life, usually by five per cent to ten per cent a year. The sum assured usually runs out when you reach 65.

We're living longer and as a result the cost of life insurance is getting cheaper all the time. If you were sold a policy when you took out or mortgage you may find you're paying more than necessary.