What is life insurance?
Life insurance is the most simple, popular and cost effective way of protecting your family or mortgage in the event of your death. If you were to die during the term of your policy then you would have the peace of mind that your family will be left with a lump sum of money for financial protection.
The types of life insurance available
There are different types of life insurance to choose from depending on what you need to cover.
If you would like to protect your family, a level term policy will provide a lump sum. For a repayment mortgage you can choose a decreasing term policy to provide cover in line with your mortgage.
Duration of life cover
Life insurance can be bought for a fixed term between 5 to 40 years and can run right up until your 90th birthday. If you need a longer policy, give us a call on 0800 524 4153 and we can run through the options available to you.
Covering your partner
Life insurance is available either as a single or a joint policy. If you were to take a joint policy for you and your partner, normally the insurer would pay out when the first person dies. Once the insurer has paid out the policy will finish, leaving the surviving partner uninsured.
The alternative is to take out two individual policies; this means you will both covered separately and the insurer will pay out for deaths. Running two policies can be more expensive but most insurers will give you extra discounts to help, give us a call to find out more about single or joint policies.
Life insurance prices
The cost of a life insurance policy is calculated based on your age, gender and if you are a smoker. Other factors that will affect your premium is how much you would like to be covered for, the type of policy (level or decreasing) that you are applying for and the length of time you wish to be insured for.
If you are unsure about the amount of cover or the length of time to take it over then you can use our Life insurance Calculator which will help you to work out the amount of cover that you need.
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What is level term life insurance?
Level term life insurance means that the amount you insure yourself for will not change over time, this type of policy is normally used to protect your family or cover an interest only mortgage.
How level term life insurance works
If you were to insure yourself for £100,000 then that cover amount will never change while you policy is in place.
Applying for a level term joint policy
Level term life insurance can be purchased either as a single or joint policy depending on whether you would like to include another person on your policy.
If you were to take out a joint policy for you and your partner, the insurer would pay out a lump sum when the first person dies within the policy term. However, the surviving partner will be uninsured.
Alternatives to a joint policy
The alternative is to take out two single level term life insurance policies, by doing this you are insuring yourselves separately. Running two policies can be more expensive but you could double your cover and often the insurer will provide a discount for the policies.
For example, a joint policy may only cover you for £100,000 in total, whereas on two single policies you could insure yourselves for £100,000 each. That way if one of you passed away first, the remaining person would still be insured paying the same premium and if you both passed away at exactly the same time, the pay-out to your family would be £200,000.
If you would like to get a quote on two single policies give us a call on 0800 524 4153.
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What is decreasing term life insurance?
Decreasing term life insurance is designed specifically for a personal loan or a repayment mortgage where the amount you are insured for will go down as you pay the debt off.
How decreasing term life insurance works
With decreasing term life insurance you can choose the rate that your cover amount decreases at to ensure your policy will always pay out enough to pay off your mortgage or any other debts you may have.
Your mortgage rate will need to be lower than the rate at which your decreasing term cover drops.
Buying decreasing term cover
When you are buying a decreasing term life insurance policy it is very important that the amount you are insured for and the term of your policy are the same as your mortgage, otherwise your family may not receive a large enough pay-out from the insurer to pay your remaining debts off.
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What is Terminal Illness Cover?
Terminal illness cover will pay-out if you are given 12 months or less to live during the term of your policy. Terminal illness cover is included for free with all the life and critical illness insurance policies that we offer.
How long terminal illness cover lasts
Some insurers will provide this cover right up until the last day of your policy; however, most insurers will not pay-out for terminal illness cover in the last 12 to 18 months of the policy.
Although it can be a lot more expensive than a life insurance policy, critical illness cover will pay out if you are diagnosed with an illness that isn't terminal or that gives you 12 months or less to live.
If you would like to find out more about the different types of cover you can speak to one of our life insurance experts on 0800 524 4153.
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What is Critical Illness Cover?
Critical illness cover is used to insure yourself against a variety of critical illnesses covered by your policy.
The importance of critical illness cover
Many people take out critical illness cover with their life insurance policy, but it can also be purchased as a standalone product.
Critical illness cover can be taken out to protect your family and cover your income should you be unable to work due to a critical illness. You can use critical illness cover to pay off your mortgage or any other debts.
In the event that you were to suffer from a critical illness that is covered under your policy, you would receive a lump sum.
Conditions covered
Critical illness insurance will cover a number of different conditions under the policy, the insurers we use cover between 30 to 46 conditions, however there are many other insurers who will cover less, so when buying a critical illness policy always check how many conditions the insurer will cover.
Although the conditions covered will vary between insurers, they will all cover:
- Heart attacks
- Strokes
- Cancer
Claiming a critical illness pay-out
The illness you are claiming for must meet the definition of your policy to be approved. For example: if you were diagnosed with a very low level of cancer where it is contained in one cell and is unlikely to spread, you may not be covered.
The critical illness policy should pay out if the cancer has spread to the surrounding cells. It is important to remember that critical illness life cover will only pay out when the illness becomes critical.
The Association of British Insurers (ABI) ensure that every insurers' policy definitions meet their criteria which means that the policy is easy to understand and will guarantee to pay out as long as you get the illness to the specified severity.
Critical illness cover from our insurers
We provide quotes from 10 of the top UK life insurance providers, based on their claims statistics and the level of cover that they provide for their critical illness life insurance. Most of the insurers we use have paid out over 90% of critical illness cases and many have a 5 Star Defaqto Rating because of the cover they provide.
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How much life insurance do I need?
Life insurance is a selfless type of insurance as you as the policy holder actually get no benefit at all - it's all for peace of mind!
Why is the right amount of cover important?
This is the reason it is so important that it is affordable; otherwise I'm sure you would agree; it completely defeats the object of taking out a policy if you can't afford it!
Therefore it is very important that you choose the right amount of cover and make sure that you can afford it.
Do I need to renew my cover?
A life insurance policy is not the kind of insurance that you should change every year, once you have bought it you keep it. This is because it is cheaper the younger you are and will get more expensive every year. At the time of writing this, life insurance is also the cheapest it has been for the last 10 years!
How much cover should I consider?
When deciding how much cover you need, think about the things that you pay out for every month and whether or not your family would be able to afford to pay them without your income.
If you have a mortgage then it is sensible to take out cover to ensure in the event of your death your family could pay off your mortgage. You may though wish to take some additional cover out so that they have some financial security.
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How long should I be covered for?
One of the factors used to calculate the standard cost of life insurance is your age. Life insurance will get more and more expensive every year the older you get, so if you can it is worth taking a policy out for as long as possible as this will vastly increase the chances of a claim being made on the policy.
Deciding how long to be covered for
Think about why you are taking out the policy; if you are covering a mortgage then you probably only need to take your policy for the term of your mortgage, but you may want to consider taking a separate policy to run alongside it which will cover your family and funeral costs.
How long can I be covered?
Most insurers will cover between 5 and 40 years, but there are policies which can cover you right up until your 90th Birthday, some people prefer to take a policy this long as there will be a lot more chance that you will claim on it and the premium will stay exactly the same for the whole term of the policy.
Covering your children
Another way of looking at the term, especially if you have children is to take a policy that takes them to an age where they are independent - such as 18 or 21 years old. This ensures that if the worst was to happen before this age, you have the peace of mind that they have some financial security to get them through University and maintain a good standard of living.
The only problem with doing this is if you outlive your policy and still need life cover, you may find that it will be a lot more expensive as you are older.
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Life Insurance companies
We compare discounted quotes from 10 of the top UK life insurance providers, saving you lots of time seeing quotes from all the insurers in one place but also being safe in the knowledge that you are getting a cheaper price than going directly to the insurer's websites.
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What does putting a policy in trust mean?
When a claim is made on a life insurance policy, the insurance provider will normally need to see a death certificate as proof of death. Your beneficiary (the person who receives the money) may be liable to pay inheritance tax if your total estate, including your life insurance policy, is over the inheritance tax barrier.
How it works
By putting your life insurance policy into a Trust you will then be able to name specific people to receive the money in the event of your death.
Avoid tax with a trust
There are a couple of benefits to doing this, the main one is that you will have the peace of mind that the money is going to right people Tax free.
By putting your policy into trust your beneficiary will avoid inheritance tax. It also speeds up the process of your loved ones receiving the money.
Setting up your trust
We will help you to setup your trust - we charge no fee for doing this and the trust itself is free of charge. If you need any more details about this, please speak to one of our life insurance experts.
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I have life insurance through my employer - is that enough?
Most companies offer some level of death in service to their employees; the normal cover is 3 times your annual salary.
How would your family cope with your current policy?
It is still worth thinking about if this would be enough to provide your family with the financial security that you want for them if they had to manage without your income.
It is also worth considering that should your employment cease, your life insurance will also stop.
Running two life insurance policies
What a lot of people do is take a smaller policy that runs past their employment age, this way the family have some cover if the worst was to happen after you retired to cover any outstanding debts and funeral costs.
Covering your mortgage
If you have a mortgage you may still want to consider taking out a policy at least to protect the amount and the term. The cover that you get through you employer doesn't cost you anything; this will just be extra financial protection for your family.
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