Life insurance pays out a lump sum to your loved ones if you pass away while your policy’s in place.
It can cover any outstanding financial commitments you have - like your mortgage or loan repayments - so your family won’t be left with payments they can’t afford after you’re gone.
It’s not a legal requirement, but it does give your dependents financial stability when you die and in some cases, if you’re unable to work because your health deteriorates.
You have a few choices to make before you buy a life insurance policy.
For example, do you want the insurer to pay a set balance when you die regardless of how long you’ve held the policy for? Alternatively, would you prefer the insurer to decrease the value of cover as the policy gets older to cover outstanding debts?
The policy you pick depends very much on your circumstances.
Find out all you need to know about different types of life insurance coverage below and read more about whether you need life insurance.
There are three main types of life insurance - choose the one that’s appropriate for you and your dependants
The simplest type - you decide the pay-out value and duration of the policy at the outset.
If you die within the term of the policy, your dependants will receive the pay-out as a fixed sum. The amount paid out stays the same regardless of when a claim is made.
Also known as mortgage life insurance, it’s designed to cover debts that decrease over time - like your mortgage.
The amount paid out by the policy reduces with time. If you were to die near the start of the policy term, your dependents would receive more than near the end, when there’s less mortgage to pay off.
This can be a cheaper life insurance option than level term. But if your circumstances change, and you increase your borrowing, you might find the amount isn’t enough.
Whether you take out critical illness cover with life insurance or on its own, this type of protection can help you financially if you’re diagnosed with a serious illness.
You’ll be insured for a fixed amount which will be paid to you in monthly payments or in a lump sum which allows you to pay off any outstanding debts you have.
Critical illness cover is usually part of a life insurance policy, but it can be bought on its own. It’ll help you financially if you’re unable to work, for example.
If you become very unwell and make a claim on an integrated critical illness life insurance policy, the insurer would pay out one lump sum and the policy would come to end. There would be no further funds available for dependants at a later date.
We can help you find the right life insurance for you at the right price, so your family aren’t left with payments they can’t afford.
Choose the amount of cover you need and the length of time you’d like to be covered for
Just a few details about you - it’ll take about ten minutes
Choose the best option for you and sit back knowing your family are protected
There are a number of different types of life insurance available, with premiums largely based on your personal circumstances and required cover.
Find out more about how to choose the right life insurance cover for you.
If you’re aged between 50 and 79, you can get a whole of life policy without the need for medical assessments. You’ll stop paying premiums when you reach 85 or 90. There’s usually a short qualifying period at the start of the term.
If you’re in a relationship, you could take out a policy that pays out in the event of either of you dying. It can be a cheaper option than holding two policies. But it will only pay out on the first death, after which the cover will end.
When you’ve got a little one on the way, thinking about the future is inevitable. If you were to pass away, life insurance could cover childcare costs as well as the mortgage, so your partner won’t have to worry about paying out large sums of money.
A pre-existing medical condition can mean fewer life insurance providers to choose from. You might also have to pay a higher premium to have your condition included on your policy. Alternatively, you can choose to exclude your existing illness from your cover altogether but the policy won’t pay out if you die as a result of the excluded condition.
The cost of your life insurance policy depends on quite a few things.
How old you are, if you’re generally in good health or not, your lifestyle, and whether you smoke and/or drink all play a part.
It’s possible to find cover from £5/month, depending on your circumstances and the type of policy you choose.
Generally, decreasing term life insurance costs lesss than level term for example, because the pay-out from the policy decreases with time.
As soon as you have people who rely on your income, like a partner or children, things change.
Could they cover the cost of the mortgage, any other debts, or everyday living without your income?
If the answer is no, think about getting life insurance.
Deciding how much life insurance you need and how long to make the policy last for can be a difficult decision. We’ve put together some pointers to help. When you get a quote with us there’s a calculator to help you work all this out
It’ll help work out how long you need cover for too. If it’s for your mortgage, take out life insurance to cover your remaining motrgage term. If it’s to see your children through thier education, make sure it covers you until your youngest finishes their education
You’ll have to decide whether to take out level term or decreasing term cover to work out how much you’ll pay in premiums. The higher the amount of cover, the more your premiums will cost
Make sure it’s enough to cover what you need it to - do you want to pay for your mortgage, funeral, childcare or bills? Do you have any other outstanding debts?
Remember, the sum you choose at the outset might be worth less in real terms in a few decades’ time due to inflation
It’s possible to hold multiple life insurance policies and in some cases this might be worth considering. If, for example, you have an existing policy but need more cover, the most cost-effective way might be taking out an additional policy.
Technically no, but the two terms are often used to mean the same thing. Strictly speaking, life insurance pays out if something happens to you, whereas life assurance pays out when it does. So level term cover is life insurance, whereas a whole-of-life-policy is life assurance.
It’s no different to a standard life insurance policy, it’s just tailored specifically to clear any remaining mortgage debt after the policyholder's death. It’s usually a decreasing-term policy to reflect the reducing balance of your mortgage over time. Find out more in our guide.
This is dependent on your circumstances, but the right income protection (IP) policy can be valuable as a stand-alone product or as an addition to life insurance/critical illness cover. Life insurance won’t cover you if you cannot work due to illness or disability. Some IP policies include an element of death cover.
It’s simply a way of insuring your monthly payments so they’ll still be paid if you’re unable to work due to ill health. Payments are made either until the end of the policy term, until you’ve reached a specific age, or until you’re able to return to work. Find out more in our guide.
Some policies include cover for terminal illness. They’ll pay out while you’re still alive if you receive a terminal diagnosis and are expected to die within 12 months.
Life insurance pay outs are not liable to income tax or capital gains tax but your heirs could be liable for inheritance tax on any pay out received. Writing your life insurance policy in trust could help reduce inheritance tax liabilities. But do seek advice from a tax specialist first.
If a policyholder cancels within a certain period of time then the adviser or broker who sold the policy would have to repay a proportion of their commission back to the provider.
It can help protect you from being mis-sold a policy by a broker. The broker will want you to have an appropriate policy that you’re happy with so you’re less likely to cancel it.
You may be eligible to claim bereavement support payment to care for you and your children if your partner or spouse dies. Bereavement benefits changed substantially from 6 April, 2017, so check what you can claim.
For comparing quotes online, Gocompare.com introduces customers to theidol.com. For help, guidance and advice, Gocompare.com, introduces customers to Assured Futures Limited. Assured Futures Limited is authorised and regulated by the Financial Conduct Authority no. 176392
Your cover will depend on your individual needs, circumstances and the premium you choose to pay
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