Life Insurance: The Most Frequently Asked Questions


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Life Insurance FAQ (Frequently Asked Questions)

Read the most frequently asked questions about life insurance policies; see the answers, compare quotes and find the best deal to suit you.

Why should I take out life insurance?

If you have a life insurance policy, in the event of your death, your family will be financially provided for. Read more information about this in the beginner’s guide to life insurance.

If I already have a life insurance policy, is it best to shop around?

If you have an existing life assurance policy, you may benefit by looking at comparison quotes and changing your provider. This is called re-broking. Before you do so, be aware that age will be taken into major consideration when calculating premiums; the older you are, the more at risk of death you are, and the higher your premiums. Therefore you may not find a cheaper deal than your existing one.

Is life assurance identical to life insurance?

The terms are often used to mean the same thing although there is a difference: life insurance pays out if something happens to you, whereas life assurance pays out when it does.

What is term life insurance?

Term cover provides a lump sum payout if you die during the course of the policy; it is the most well-known insurance cover.

What is the meaning of whole of life insurance?

This can sometimes be referred to as life assurance as it is guaranteed to provide a payout when you die. Whole of life cover is more expensive than term cover as it carries the guarantee.

Is over-50s life insurance any different?

For people aged between 50 and 80 they can take out a particular form of whole of life insurance that carries guaranteed acceptance without the need for a medical check.

What is convertible term insurance?

This is a term insurance policy for which you don’t have to provide further medical evidence on changing to a whole of life or endowment policy at the end of the term.

What is the meaning behind decreasing term insurance?

This type of term insurance offers cover in which the amount of cover you receive decreases over the years; this can frequently run parallel to a repayment mortgage.

What is level term insurance?

This form of term insurance is where the cover amount is fixed for the duration of the policy.

What does critical illness cover provide for?

If you are diagnosed with a condition specifically listed in your Terms and Conditions that means you cannot work again critical illness cover can help you out with a payout. You can usually integrate this with life insurance (an integrated policy) or buy as a stand-alone product (an independent policy).

How does this differ from terminal illness cover?

If you become terminally ill and have this type of policy, then terminal illness cover can pay out for the life covered.

This is often offered as a standard feature of life insurance policies and you are advised to carefully check your Terms.

What about income protection?

Buying the correct income protection (IP) policy can be as a stand-alone product or as an extra add-on to life insurance/critical illness cover. The cover will depend on your circumstances and some IP policies offer an element for death cover.

How do I know how much cover I need?

The amount of cover that is right for you will depend on your circumstances and for what specific needs you want cover. Take a look at our life insurance calculator to give you a guideline. However, we do recommend you get professional advice as this is an important product for you to fully understand. Our partners LifeSearch can give you free, impartial advice.

How much will I have to pay?

The amount of your premium is likely to vary from one provider to the next and between various products. The typical factors considered by life insurers are:

  • Cover and options bought
  • Sum assured
  • Duration of policy
  • Age
  • Occupation
  • Relationship status
  • Medical history
  • Family medical history
  • Height and weight
  • Children
  • Lifestyle choices such as consumption of alcohol and smoking.

Are you aware…?

Whilst joint policies are cheaper than two individual ones, providers will only pay out once.

What are joint policies?

Joint policies can be taken out by partners; they are likely to be cheaper than two independent insurance policies. However, the policy will pay out only once so if one partner dies, the remaining partner would no longer be insured.

How does it affect me if I already have insurance through my employer?

Often referred to as death in service cover. You need to check out if the payout would be enough to provide the level of cover your dependants need. The cover will stop if you leave your employer.

Will existing medical conditions affect my policy?

This varies from one insurer to the next. If you have an existing medical condition, it is quite likely that your monthly premium will be higher; in some cases you may experience more difficulty in finding a provider willing to insure you if you carry a higher risk.

Are there any additional cover options?

There are a variety of options available for cover, depending on your individual need. Some of these may be:

  • waiving of premiums
  • funeral cover
  • bereavement counselling.

What does waiving of premiums mean?

This term refers to a way in which your premiums can be insured in the event that you are unable to work due to ill health. Payments are made until: the end of the life of your policy, when you reach a certain age, or until you can return to work.

Are life insurance payouts exempt from tax?

Life insurance payouts will not be liable to income tax or capital gains tax deducttions. However, according to your situation, your heirs could be liable for inheritance tax on the accrued funds. You can avoid this by having your life insurance policy written in trust.

Are you aware…?

  • In 2012 the Law was changed so that females no longer paid less than males for life insurance,

Who will benefit from my life insurance?

You can specify in your policy who will gain; it is not up to the provider to choose.

Do women still pay less for life insurance?

Since the European Court of Justice gender directive was introduced in 2012 this gender-related factor can no longer be taken into account when it comes to calculating life insurance premiums. Women used to pay less than men as they have a longer life expectancy than men.

What does clawback mean?

Under the terms of agreement, if a policyholder cancels within a defined period of time, the adviser or broker who sold them the policy would be obliged to repay a percentage of their commission back to the provider.

What is a life table?

Life tables are sometimes referred to as mortality tables or actuarial tables; they display the probability that a person of a certain age will die before their next birthday. This is the guideline on which the life insurance industry rests upon. The probability of life expectancy for that year can be determined using these tables, as can the remaining life expectancy for people of different ages.

For answers to any further questions, see our life insurance guides.

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