None of us like to think about the worst happening. But it’s important to consider what would happen to your family if you were to die or be unable to work due to accident or illness. Life insurance can help to take away this worry, by providing your family with money to help them manage everyday finances as well as extra costs. In this period of nationwide economic uncertainty, there’s never been a better time to consider getting life insurance to protect your family’s future. But finding the right life insurance quotes for your individual needs can be difficult. In this guide we’ll talk you through the different types of life insurance available and how you can choose the right one for your family.
Life insurance provides your dependents with a cash payout if you die during the term of your policy. This could be monthly payments for a fixed amount of time, or one cash lump sum. It can also have added extras, such as Critical Illness Cover, which will also provide a payout if you’re diagnosed with a terminal illness. When you take out life insurance, you can decide how long you would like the cover to last and how much you would like your dependents to receive.
Life insurance has many benefits, including:
There are many different types of life insurance out there and deciding which one is most best for you depends on a number of factors:
If you don’t have children or outstanding debts, the amount of life insurance you need would be far lower than someone who has young children and another thirty years left to pay on their mortgage.
There are two main types of life insurance: whole of life insurance and term insurance.
Whole life insurance policies provide protection until death. The amount of payment you’ll receive from the policy is guaranteed throughout the term of your cover so you’ll always know how much your family will receive if you die. Payments for whole life policies can be made monthly or annually, and can even be made as a lump sum at the beginning of your term, giving you a bit more flexibility around how you pay. Some whole life policies also offer early payouts if you are diagnosed with a condition which prevents you from taking care of yourself, such as dementia or Alzheimers.
Term, or term life, insurance provides insurance for a specific amount of time (usually between five and twenty five years). There are a number of different types of term life insurance, each with their own pros and cons. Term life insurance policies can be useful because their duration usually covers the most expensive years of your life (when you are paying off a mortgage and raising young children) and you may not feel that you need life insurance after this. However, if you decide to extend the term of your policy, or buy a new one after it has ended, you might find that prices increase significantly.
Level term life insurance: Level term life insurance provides a set payout which won’t change throughout the life of your policy. Monthly premiums will also remain the same. This can be very helpful for families on a budget as they know exactly how much they’ll have going out each month. It’s also popular because you know exactly how much you’ll receive after death, so you can be confident that all of the household expenses will be covered. One disadvantage of this type of policy however, is that it does not keep pace with inflation (in July 2022, this was 10.1% in the UK ) so the same cash payout could be worth less in real terms later on in your policy.
Increasing term life insurance: An increasing term life insurance policy can help to make sure that payouts keep pace with living costs but also means that you’ll face increasing payments throughout your term. Your monthly payments will be reviewed annually by your insurance company. This can mean that payment increases are difficult to plan for, especially when other costs, such as energy and food, are also rising.
Decreasing term life insurance: A decreasing term life insurance can be used to support paying off specific debts, such as a full repayment mortgage. As the name suggests, this type of insurance policy provides a decreasing payout each year of your policy.
That means it can be harder to plan your future because the amount you would receive changes annually. However, this type of life insurance generally offers lower premiums so it can be a good choice for those with tighter budgets.
Critical Illness Cover can also be added to many life insurance policies to provide protection in case you are not able to work due to accident or illness. This can be especially useful for self-employed people who won’t receive the same statutory sick pay benefits that employed people do.
It is also possible to take out a joint life insurance policy with another individual. Often, this is something that married couples might do, with payment going to the surviving partner after the other’s death.
There are also several other types of life insurance to consider which offer both smaller payouts, and smaller premiums.
Mortgage insurance provides protection for mortgage payments and reduces over time as your mortgage gets smaller. Often, this can be a cheaper alternative.
If you’re aged 50 and up, you could also consider an over-50s life insurance policy. These policies pay out a fixed lump sum to your family when you die which can be used to help with paying off debts or covering funeral expenses. Unlike whole life insurance policies for younger people, the amount your family would receive is set and you cannot borrow against it. Most people will also be accepted for over 50 life insurance without the need to answer medical questions. Monthly payments can also be quite low as the amount of cover needed is generally smaller. Many people, who may have already paid off their mortgage and whose children are now financially independent, may choose over 50s life insurance as a way of helping their families to pay funeral costs. People aged between 50-80 are eligible to take out over 50s life insurance.
It’s possible to take out ordinary life insurance through most providers up until the age of 65. Taking out a life insurance policy later in life though can mean that your payments are high, especially if you have any health conditions.
This depends on the type of policy, how long you want the cover to last for, and the level of support you’d like to provide for your loved ones. As a general rule, the higher the amount of protection your life insurance policy provides, the larger your premiums will be. It’s important therefore to strike a balance between making sure that your policy offers enough cover to suit your personal needs and not paying out too much in your monthly premiums.
Before you apply for life insurance, you’ll want to spend a bit of time on a comparison site, such as Free Price Compare to find the best quotes for life insurance for your needs. This will provide policies from a range of life insurance UK providers which can be tailored to your needs. Before you’re able to apply for life insurance, you’ll be required to answer a few questions to check your eligibility:
Life insurance can help to provide peace of mind to you and your loved ones. When it’s time to search for your perfect life insurance quote, you can rely on Free Price Compare’s simple online tool to help you find the best cover for your needs.
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