Comparing Life Insurance Policies: A Guide

June 3rd, 2022
Comparing Life Insurance Policies: A Guide

Life insurance is designed to take the financial burden away from your loved ones when you die. Having a good life insurance policy in place can serve to protect your family from financial hardship, bring you peace of mind and help them at what is inevitably a difficult and emotional time. Life insurance, which pays out a lump sum when you die, helps to protect those you love the most. Shockingly, it is estimated that as many as 8.5 million people in the UK – one in four breadwinners – do not have life insurance in place [1]. Free Price Compare can help you to find the right life insurance cover for you and your family.

Why is life cover so important?

Nobody really wants to think about their own death and what might happen after they are gone. It is a difficult subject but nonetheless, one that needs to be considered. Life cover can help to make your family financially secure. It can give your loved ones a financial cushion which can enable them to cover bills and expenses and cover the lost income that may impact on the family budget.
Life insurance may also help your family to pay off any debts you leave behind, or simply give your partner or children a lump sum which can provide them with more financial freedom in the future, for example, to pay for university fees or buy their first property. Life insurance can also help to cover funeral costs which, given that the average cost of a funeral today is £4,184 [2], could be very welcome support at a difficult time.

Things to consider before taking out life insurance

There are several different types of life insurance on the market and you do, of course, want to find the best one for you. Things to consider before buying a life insurance policy include your age, health and lifestyle, the level of cover you want, the term you require and the pay-out options. At Free Price Compare, we can help you to consider all the different types of life insurance policies available in the UK today.

What is the difference between life insurance and life assurance?

When researching life insurance, you may also come across the term life assurance. Many people assume these two things are the same and the terms can be used interchangeably. That is not the case and there are some key differences between the two.

What is Life Insurance?

Life insurance will pay out a tax-free lump sum to your named beneficiaries if you pass away within an agreed term, for example 30 years. If you live beyond this, the policy simply ends and no money will be paid out. You may want to take out life insurance that covers you until you retire or have paid off your mortgage. There are also different options within the life insurance bracket:-

Term life insurance– This type of life insurance guarantees payment of a fixed sum if the person covered dies within a specific term.

When this period of cover passes, the policyholder can choose to renew it or covert the policy, or simply allow it to end. Often the most affordable type of life cover, the set term helps families when it comes to budgeting and planning life cover payments. It does not have any savings component as some other varieties do and there is no other value beyond the guaranteed death benefit. This is also known as a level term life insurance policy.
Decreasing term insurance

This type of insurance is also known as mortgage protection. With this type of life insurance policy, the amount of cover you have reduces over time, usually in line with your mortgage repayments. For example, if a homeowner has 10 years left on a £250,000 mortgage, they can take out a policy for the life of that mortgage, which will help to pay off the mortgage if you should pass away. This type of policy enables you protect your family and the property you have invested in, allowing them to continue repaying the mortgage in the event of your death. It is usually cheaper than level term life insurance too. One disadvantage, however, is that the life insurance benefit value declines as your mortgage is paid down but you continue to pay the same premium for your insurance.

Increasing term insurance

The cover provided by an increasing term life insurance policy will increase by a certain amount each year in line with the Retail Price Index. This helps to account for the effects of inflation.

What is Life Assurance?

Life assurance is a type of life insurance that runs indefinitely. Also known as whole-term life insurance, it is not set for a certain number of years. It covers the whole of your life, so a payment is assured. Provided that you keep up your premium payments, your policy will pay out regardless of the age at which you pass away. Life assurance policies, or whole of life insurance, can often be more costly than a term life insurance policy but they do give peace of mind that your family will be looked after no matter what age you die. This type of life cover can also be helpful in inheritance tax planning.

When setting up a life assurance policy, a policyholder usually decides on a lump sum pay out and their monthly payments are calculated accordingly. Some policy providers will allow you to cash in a life insurance policy early. If you do choose to do this, you will receive the value of the fund at the time but may incur some penalty charges. This can often be a substantial amount which can significantly impact on the amount. Cashing in early may mean you end up with considerably less than you paid in.

What is the difference between life insurance and critical illness cover?

Critical illness insurance can be bought alone but many insurers add it to a life insurance policy as an extra level of protection. Under critical illness cover, you are given financial protection in the event that you are diagnosed with a serious illness such as cancer or become unable to work due to a health issue such as a heart attack or stroke. It will cover you for a fixed amount that can be paid either as a lump sum or monthly. This type of cover can help to give you reassurances that you and your family could cope financially in the event you do become seriously ill, especially if you are the household’s main earner.

This type of life cover can be attractive, given that life expectancy in the UK now stands at 79.4 years for men and 83.1 years for women [3], meaning you are more likely to work longer. However, not every condition or illness is covered so it is important to thoroughly check and know the terms of your policy. Critical Illness Cover will only pay out when you fall ill, not when you pass away. Most providers will only pay out for one claim so if you do fall ill again, you will not be able to make a new claim.

You may ask whether you can get life insurance if you have pre-existing medical conditions. It is still possible to do so, although you may not have a wide choice of insurers. Premiums are also likely to be higher unless you decide to take out a normal level term or decreasing term policy but exclude your existing medical condition from the terms.

Are there any other varieties of life insurance?

Over 50s life insurance is another option on the market. This type of insurance cover is for people aged 50 to 79 and does not require medical assessment. You can also stop paying the monthly premium when you are 85 or 90. Such insurance policies are usually lower in value and one of the main purposes of this policy type is to cover the cost of a funeral. The lump sum could also be used to pay off debts or simply as a gift to family. Policy values in an over 50s cover usually range between £1,000 and £25,000.

Should I take out joint or single life insurance?

In selecting a life insurance policy, you also need to decide whether you want to take out single or joint cover. Joint cover is popular with couples, especially those who have families. Single policies cover each person individually, while a joint policy covers both people. However, there are benefits and disadvantages to both and factors such as your age, health, job, lifestyle and the amount of cover you require should be taken into consideration when making the decision.

A joint life insurance policy is often cheaper than two separate ones. But it does only tend to pay out once. First death policies pay out if one of the policyholders dies within the term, meaning the other person no longer has any life insurance. A second death policy only pays out upon the death of both policy holders. A joint policy is, however, more difficult to sort out if a relationship ends in divorce. There were more than 100,000 divorces in England and Wales in 2019 [4], so this is certainly a factor to consider when choosing a joint or single policy.

A single life insurance policy, meanwhile, allows you to take on different levels of life insurance cover. It means the main earner in the household may want to take out life cover for a larger amount, while a lower income earner may want to select a smaller amount to make payments more affordable.

Let Free Price Compare help you find the right life insurance policy for you
Life insurance is not a legal requirement. However, it is clear that anyone with dependants should certainly consider taking out a policy. Policies can be taken out from the age of 18, although many people do not turn their attention to it until they become parents or take on a mortgage. Your level of cover depends very much on your personal circumstances and what type of policy you wish to take out. The cost of your life insurance policy will be dependent on a number of factors including your age, your lifestyle, overall health, what type of life insurance you require, the length of the policy and whether you choose any add-ons such as critical illness cover.

 Free Price Compare can help you to sort through hundreds of life insurance policies to find the right one for you. Simply enter your details and information into our online tool and we will show you the best matches for you within seconds.

As Benjamin Franklin once said: “In this world nothing can be said to be certain except death and taxes.” Life insurance can, therefore, be viewed as an investment for your loved ones’ future, bringing you peace of mind that they will be financially looked after even if you are no longer around.

Illustrative life insurance premium prices

Life cover (Level term assurance)
Age £100,000 over 20 years £250,000 over 20 years
Non-smoker Smoker Non-smoker Smoker
25 £3.74 £5.28 £6.26 £9.95
35 £5.66 £10.10 £10.79 £19.86
45 £11.18 £25.13 £23.38 £54.76
55 £26.40 £69.98 £61.16 £166.36
Life cover with Critical Illness (Level term)
Age £100,000 over 20 years £250,000 over 20 years
Non-smoker Smoker Non-smoker Smoker
25 £3.51 £5.71 £5.71 £6.81
35 £4.91 £9.26 £9.26 £13.50
45 £7.37 £17.63 £17.63 £29.80
55 £18.65 £43.63 £43.63 £70.96
These prices are provided by our partner LifeSearch as of the 27th April 2022. Prices shown are monthly premiums based on smoker and non-smoker rates (no nicotine or replacement for minimum of 12 months) and assume no additional health conditions or hazardous occupation or hobbies.

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