What is life insurance? Life insurance policy pays out a lump sum to your loved ones if you pass away while your life insurance policy is in place. It can cover for any outstanding financial commitments you have – such as your loan repayments or mortgage - so your partner and family won’t be left with high payments they can’t afford to pay after you’re gone.
In the event that the worst happens, a life insurance policy gives you a peace of mind as your loved ones are looked after financially.
Could your partner pay ongoing mortgage payments without your income? Life insurance policy could help your loved ones stay in the family home.
Funerals can cost thousands £££. Save your family the expense with a life cover policy that’ll pay out for yours.
No parents would want to think about their kids growing up, going to university or buying their first property without them there to help. But if something were to happen to you, life insurance cover could give them a more secure financial freedom and better future.
Before comparing life insurance quotes, you should consider following:
1. What type of life insurance policy you want – Level cover or decreasing cover (also known as mortgage protection cover)
2. How much cover you require – When deciding how much cover you need, consider your current debts (mortgages, car finance, loans etc) and dependents
3. Cover length – You can choose cover length from 10 to 50 years.
4. Additional cover – You might want to add critical illness cover, some policies do include critical illness cover as standard, but this tends to be at 20% of the policy cover amount, for the full cover you will need to add this separately.
5. Joint or single policy – You might want to consider a joint policy if you have a partner or want to take out policy with a family member.
The Cost of Life Cover
There are number of factors that determine the cost of life insurance, ultimately the insurer looks at the risk that they will have to pay out the large lump sum:
Age – If you are in good health, then life insurance will be cheaper if you are in your 20’s compared to in your 40’s for the same level of cover which is why it is advisable to start your cover as young as possible, but do take into consideration inflation and the cost of living from the start of your policy (for example if your policy started in 2020 the cost of living will be different in 2040)
Health – Your current health has an influence over the cost of a life insurance policy, providers will ask for your height and weight to see if you are overweight, you will be asked about previous health issues and then about any family conditions that may be hereditary.
Lifestyle – You are asked about the amount of alcohol you drink per week, the amount you exercise and if you have smoked in the past 12 months.
It is possible to find insurance cover from little as £5* a month, depending on your age and the policy value
Type – If the policy is decreasing term then the price will be lower because your pay-out reduces each year compared to a level policy that has the same policy value for the duration of the policy
Where you live – This is known as environmental factors that will look at factors such as air quality.
You are not legally required to have life insurance cover, however, it will provide financial stability to your dependents when you pass away and in some cases when you are diagnosed with critical illness which stops you doing any work.
The cover you pick will entirely depend on your circumstances and your personal choice, you should consider how much lump sum you want to leave and what would it be for, would it only cover the mortgage or would you also want to cover the loss of earnings for the household.
What types of life insurance policies should I compare?
level term life insurance
When you compare a level life insurance policy you are comparing policies that pay out the fixed sum that you have chosen at any point of the term of the policy (usually the full amount will be paid out after year 1) This policy type is the most simple and easy to understand cover – The amount you receive will never change.
1. Pay out amount will remain same throughout policy
2. You are required to decide policy duration and the pay-out amount
3. The insurer will only pay out during the term duration you have agreed (between 10 – 50 years)
4. Your loved ones will be paid a fixed lump sum
Critical illness insurance policy
You can compare the prices of critical illness cover with level term or decreasing term or alternatively you can just take out critical illness cover to protect you financially if you are diagnosed with a life threatening or terminal illness.
Usually you are insured for a fixed amount that can be paid as a lump sum or paid monthly to you to cover any outstanding debts.
If you are very unwell and unable to work, you can make a claim on an integrated critical illness cover, your insurance policy provider usually pays out one lump sum to you and your policy would end. The insurance policy provider will not make any future payments to you or your loved ones.
1. If you are diagnosed with life threating or terminal illness, the insurer can pay out monthly or fixed lump sum
2. With us you can add critical illness cover to your policy
3. You can buy critical illness cover with or without life insurance cover
Decreasing term (Mortgage protection)
Decreasing term cover is also known as mortgage life insurance and mortgage protection insurance which is designed to protect debts that decrease over time, such as your residential mortgage.
Comparing these policies will provide cheaper prices than a fixed term policy because the amount paid out by the insurer under this policy reduces with time. For example, if you pass away near the start of your agreed policy term, your loved ones would get more pay out compared to the end of your policy terms.
1. The pay-out amount decreases over time
2. Its specifically designed to protect debts such as your mortgage
3. It can be cheaper than level term life insurance
There are various other types of life insurance options available and your monthly premiums are based on your personal requirements and individual circumstances.
Joint life insurance policy for couples
If you are married or in a relationship, you and your partner can take out a joint policy cover which pays out in the event of one of you passing away. In most cases its can be cheaper to have a joint policy than two single polices. However, it only pays out for the first death and cover will end once lump sum paid. So in the long run it could be more cost effective to take 2 single premiums that run alongside each other’s.
New parent life insurance
Is you are planning on becoming parents or you have recently become a parent, it is very important to think about the future. If one of you passes away could you maintain paying the mortgage, house hold bills and childcare or would you need to stop working to look after the child? Having a lump sum could ease the financial stress and still allow you to remain in your property and stay in work.
Over 50’s life insurance cover
Any one aged from 50 to 79 can get a whole of life cover which doesn’t require medical assessment. There’s a short qualifying period and you can stop paying monthly premium when you are 85 or 90.
These insurance policies tend to be lower in value than a level or decreasing term and are primarily designed to cover the cost of a funeral and any immediate expenses. The maximum policy value tends to be around £25,000 but there are guaranteed acceptance schemes with no medicals required.
Pre-existing medical cover
Unfortunately, not all insurance providers support pre-existing medical conditions which means when comparing pre-existing medical cover, you are only going to get quotes from a few insurance suppliers and you’ll also notice your premium will be higher than a normal policy.
If you have a pre-existing medical condition and didn’t want to pay the higher premiums you can still get a normal level term or decreasing term policy but you would need to exclude your existing medical condition from the policy and therefore you wouldn’t receive a pay-out on the stated conditions.
Life Assurance vs Life insurance
Life assurance (Also known as whole of life cover) is a type of life cover policy which comes with no term limit. As long as you keep up with your monthly premium, the life assurance policy will always be paid on death regardless of your age when you pass away.
What makes you look for life insurance?July 13, 2022-Content in this article You become a parent You take on a new liability such as a mortgage To help pay for a funeral To 'lock in' good terms while…
Life Insurance Frequently asked questions
"But nothing in this world is said to be certain, except death and taxes" Benjamin Franklin.
Unfortunately, death can come to us at any time, and for many of us, we want to ensure our loved ones financial needs are met.
Life insurance is an insurance policy that pays out in the event of the policyholder passing away. Its normally taken to cover mortgages, funeral expenses or a lump sum to be given to loved ones.
If you have dependents, particularly young children or a family then a life insurance policy is something that would be recommended. It can cover any financial commitments that you have such as a mortgage or provide lump sum which could give your loved one’s financial security
There are 5 “terms” which are the most popular and these are:
Decreasing term insurance policy
Normally taken out with a repayment mortgage to cover this cost. As the amount owed on the property reduces over time so will the pay-out, this is the cheapest option to take out.
Level-term life insurance policy
This policy will pay a fixed amount of money at the time of death (as long as the policy is still active). You would select the amount that you want the lump sum to be and this would remain fixed over the term of the policy. This is normally more expensive than a decreasing term insurance policy
Joint life insurance policy
As the name suggests, it covers couples and will pay out once when the first partner passes away within the term of the policy
Whole of life insurance policy
Will guarantee to pay-out upon death, even if that comes at a ripe old age of 100 plus.
Over 50’s insurance policy
This policy is designed for people who are aged over 50. Its pay-out is smaller as it’s designed to cover funeral expenses so the policy value is typically between £1,000 and £25,000
This will depend on your financial commitments and whether or not you want to leave a lump sum after these commitments have been met. As a minimum you should cover your mortgage and funeral costs and then depending on your budget add a cash lump sum too.
This is very much dependent on the circumstances surrounding your situation and what you would want to leave your loved ones. There is also a critical illness add-ons you could select, this will pay-out if a critical illness is diagnosed by medical professionals to help with financial matters during your treatment
The cost of the policy is based on a number of factors, are you smoking, your age, previous medical conditions, current health, the term type (Level, Decreasing, Joint, etc..), the amount needed to be covered, the length of the policy and also if critical illness is added.
It’s possible to get a policy from the age of 18. Most people think of getting a policy if they have a mortgage and / or dependents. Premiums prices increase as age increases.
Certain financial institutions will insist upon it. However, it’s considered a good judgment call to take one out, as death could come at any time, and without life insurance in place, your loved ones may struggle.
It is important to review the level cover periodically to ensure that the current policy meets all of your needs, you can take out a second policy, add to an existing one or cancel the existing one and take a brand new one. We would recommend that you review the policy cover if there is a major circumstantial change such as moving home (to cover the new mortgage if this has increased), getting married or having a child (to leave a lump sum).
It’s a tax-efficient measure where the money is paid out into a trust, and not considered part of the estate when relevant bodies calculate inheritance tax.
Yes, but it could cost more, as it’s viewed as a higher risk. The most common pre-existing conditions which most companies cover, but not limited to are; asthma, diabetes and obesity.
You must make sure to declare ailments when taking out the life insurance cover as a failure to be transparent could void it.
You can still take out a traditional life insurance policy, but the prices will be higher than a 30 year taking out the policy, and there are upper age limits for when the policy will expire, typically this is between 70 and 75 or there is over 50s plan, where the monthly price is a lot lower but the pay-out is also a lot smaller and commonly taken out to cover funeral expenses. However, as it is a lump sum, the beneficiaries are able to spend it any way they see fit
If you missed the payment, contact your life insurance provider and explain why it was missed and seek to make alternative payments.
Certain policies will allow you to make a claim if you’ve been diagnosed with a terminal illness and having less than 12 months to live
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*Life Insurance: £10 per month based on a 30-year-old non-smoker taking out £100,000 level term cover over 20 years (Aviva) - Prices correct as of January 2020