Life insurance – what is and is not covered?

April 28th, 2022
Life insurance – what is and is not covered?

Life insurance is vital if you want to make sure that your loved ones have the financial support they need when you die. Taking out a policy can seem like a complicated business, however, especially when it comes to working out what is covered and what is not. Thankfully, it is not as complex as it may seem at first, as the following guide aims to show. Read on to find out all you need to know about life insurance inclusions and exclusions and why this shouldn’t put you off from comparing insurance and offering your loved ones the long-term security they need.

Life insurance in the UK

Life insurance is big business, accounting for more than 70 per cent of the British insurance market [1]. This explains why there is so much choice out there, in terms of the insurers available and the types of policy you can choose. The most used insurers in the UK in 2020 were Legal & General, Aviva, and Scottish Widows, but there are far from the only options. We are on-hand to offer our comprehensive comparison services to help you discover exactly the right choice – and the right premium – for you.

Do you need life insurance?

Life insurance is not obligatory but many people consider it a necessity if they may leave behind people who rely on them financially. This could include children or a partner. Whilst not a legal requirement, it can offer an invaluable safety net, preventing added distress at what is already a hugely emotional time. Some mortgage providers will also insist that you have life cover in order to ensure that your loan can be paid back if you were to die with money outstanding.

The amount of cover you have will depend on your own personal circumstances. You will also be asked to name your beneficiaries. There is the opportunity to take out single life or joint policies. The latter can be a cheaper option but will only offer a payout on the first death of a person named on the policy and not the second.

What is covered?

Most usual causes of death will be covered by a life insurance policy. This includes cancer, heart attacks, unexpected illnesses, and accidental deaths. Some policies may also pay out before your death if you have a terminal diagnosis and doctors predict you have less than a year to live. The most common causes of premature death in Britain are [2]:

  • Cancer
  • Heart attacks
  • Strokes
  • Lung disease
  • Liver disease
What might be covered?

One of the most common myths about life insurance is that it won’t pay out if someone dies by suicide. In fact, this is not the case, although there is a caveat to this. In most cases, a policy will pay out in the event of a suicide or self-inflicted fatal injury provided that the relevant insurance has been held for at least a year.

Here’s a list of life insurance providers within the UK who pay out on suicidal death.

Life insurer  Terms on suicidal death
Legal & General(L&G) Pays out after 12 months of policy taken out
Vitality Pays out after 12 months of policy taken out
Aviva Pays out after 12 months of policy taken out
AIG Pays out after 12 months of policy taken out
Royal London Pays out after 12 months of policy taken out
Zurich Pays out after 12 months of policy taken out
Beagle Street Pays out after 12 months of policy taken out
LV= Pays out after 12 months of policy taken out
Aegon Pays out after 12 months of policy taken out
Scottish widows Pays out after 12 months of policy taken out
What is unlikely to be covered?

Death from pre-existing conditions will not be covered. These should be declared when you take out the policy and will be pre-agreed with your insurers. Deaths from alcohol and drug abuse may also not be covered by a typical policy. The same is true when it comes to dangerous sports and high-risk activities. This is why it is important to seek out specialist insurance products if you are going to undertake something like this.

A death is unlikely to be covered if you were committing a criminal offence at the time of your death or you had provoked an assault. A policy will also become null and void if you were untruthful or offered inaccurate information to your insurers when taking out your policy.

Serious illness and life insurance

Serious illnesses will not be covered by traditional life insurance policies as these only deal with death. There are other products you could consider to cover you for serious and long-term ill-health. We are on-hand to help you compare products and find the right critical illness insurance or income protection product. It may be possible to add on some of these products to your life insurance or you can take policies out separately.

Policy differences

It is important to understand the different types of life insurance policy to understand what they cover for and how they will pay out. In general, there are 2 forms of cover: whole of life and term life insurance. The latter is level term life insurance and will pay out if you die within a set period, which is often between 25 and 30 years. It is worth remembering that, in the case of this type of policy, if you live longer than the pre-agreed period, you are unlikely to be covered. The idea of these policies is mostly to cover mortgage payments if you were to die prematurely.

Whole of life insurance, meanwhile, will payout regardless as to when you die – provided that you meet the coverage criteria of the policy. These policies do not have cut-off points but you will generally pay more for this type of insurance.

Other products include mortgage life insurance. This resembles standard policies but the amount that will be paid out reduces in line with the outstanding balance on your mortgage.

Level of life insurance

In addition to considering what is covered and not covered by your life insurance policy, you also need to think about what a payout will cover for your family or beneficiaries. This is when you need to decide what level of life insurance you want and need. This will depend on a range of factors, including how much you can afford in premiums and what degree of support your beneficiaries will require in the event of your death.

You will need to consider how much your loved ones will need in order to cover things like living expenses if you’re no longer around to contribute. Think about costs such as mortgage or rent, household and living expenses, funeral costs, childcare, children’s education, and debt repayments. It is important to think about what life will be like after your death when considering these costs. For example, childcare costs may jump sharply if you are no longer around to look after them or your family may need to employ professional carers for elderly relatives in order to fill the care gap you leave behind.

It may seem hard to calculate the exact figure that will be required but, as a general rule of thumb, you should work out how much your dependents would need to maintain their standard of living for an average year and then multiply this figure by 25 years. Another way to calculate the amount your beneficiaries need is to multiply your annual salary by between 6 and 10 times, according to some financial advisers. [3] The Association of British Insurers states that the average term life insurance payout in 2020 was £79,304. [4]

Extra benefits of life insurance

Along with the financial payout your dependants will receive, you may also want to consider what else might be covered and what additional benefits they could get. There are also policies that offer you perks while you are still alive. Added perks can include remote GP access, shopping discounts, and wellbeing and counselling services.

Problems with getting life insurance

Most people will be eligible for life insurance cover but some people may find it more difficult, or expensive, to take out a policy. Don’t be put off if you are unsuccessful in the first instance as different insurers will use their own risk assessments and criteria. One refusal does not necessarily mean that you will not be able to find the right product.

Pre-existing health conditions and lifestyle choices are the most common reasons for being refused life insurance. These can include high cholesterol, weight issues, cancer history, HIV and AIDS, hepatitis, and elevated liver function. Smoking, alcohol consumption, employment risks, and income limitations can also be factors in rejections.

In order to help yourself get the most competitive life insurance if you have been rejected, you should first find out why you were turned down. If this was due to lifestyle factors, for example, you have the opportunity to change them and improve your chances of getting an affordable life insurance product. If medical issues are to blame, don’t panic. There are insurers out there offering specialist services. Your options may be more limited but there are still products and deals available to you. If in doubt, get professional advice to ensure that you have the clarity you need when it comes to comparing life insurance policies with us.

Over 50s life insurance

If you are struggling to find a policy to cover you, it might be a good idea to think about over 50s life insurance. These whole of life policies can guarantee acceptance without you having to even answer any questions about your medical history. Just be aware that, whilst easy to get, these policies typically cost more in premiums and generally offer lower payouts, with the money typically set aside to cover things like funeral costs.

Specialist life insurance

There are life insurance products out there for all sorts of people with all sorts of needs. Whether you have a whole list of pre-existing conditions, a hazardous occupation, or a love of extreme sports, there is likely to be a product that is suitable for you. These things don’t have to be a barrier to protecting, you, your family, or your business, although it is fair to say that your options will be more limited and you are likely to have to pay more than you would for standard life insurance policies.

Compare life insurance with Free Price Compare

Comparing life insurance is an essential part of the process of finding the right cover. This will help to ensure that you get the policy you want at a price you can afford. We can offer impartial assistance and save you both time and money in the long term. We specialise in helping people like you make informed choices about their life insurance, whilst giving you access and advice on the best policies possible.

We can help take the stress out of finding life insurance cover and prevent your dependants from facing hardship if the worst were to happen. Don’t risk your loved ones being left in the lurch for the sake of just a few minutes of your time. Use Free Price Compare today and ensure your family is covered when you die. They will be missing you but there is absolutely no need for them to miss out on the material things they need and deserve.

Suicidal call helpline

Samaritans – 116 123
SupportLine – 0170 876 5200
CALM (Campaign Against Living Miserably)
Silence of Suicide (SOS) – 0300 102 0505
Papyrus – 0800 068 4141
Childline – 0800 068 1111

Suicidal message (Text) helpline

Every one – message “SHOUT” to 85258
Under 19 – message “YM” to 85258

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