What is Life Insurance?
Think of life insurance like a safety net that helps protect your family financially when you’re no longer here. It pays out a lump sum of money if you pass away while covered by the policy or are diagnosed with a terminal illness and your life expectancy is less than 12 months. The payout from a life insurance policy can help your loved ones manage any outstanding debts and keep up with the monthly bills, childcare costs and the mortgage payments.
How does Life Insurance work?
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Eligibility. To apply you need to be a UK resident aged between 18 and 77. If you choose to add Critical Illness Cover to your policy you can apply up to age 67.
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Choose the cover you need. You choose the amount of life insurance you need and how long you need it for. The monthly cost is fixed so you can budget accordingly.
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Who is the policy for? Decide if you want a policy in joint or single names.
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Get extra protection. You can add Critical Illness Cover when applying, for an extra cost.
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Option to put your plan in trust. A life insurance trust lets you manage the way your beneficiaries receive their inheritance. We can arrange this for you.
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Get a cash sum if the worst happens. Your loved ones will receive a cash sum if a valid claim is made, they can use it to cover things like household bills, keeping a roof over their head and support with everyday living.
What life insurance covers
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Cash lump sum payment – you choose how much cover you need and how long you need it for. Insurance provider will pay out a cash sum if you were to pass away after a valid claim is made.
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Guaranteed premiums which can be made monthly or annually. They won’t change unless you make changes to the policy.
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Terminal Illness Cover– is one that has no known cure or has progressed to a point where it cannot be cured, and in the opinion of your hospital consultant and insurer Medical Officer (a qualified doctor employed by an Insurer), it's expected to lead to death within 12 months- you're covered from day one of the policy starting. Please refer to the chosen policy documents or ask us if not sure.
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Critical Illness Cover – for an extra cost you have the option to add this when you take out your life insurance policy.
Things you need to know
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Not paying your premiums. If you stop paying premiums when due, your plan will be cancelled and you won't get anything back
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No cash value. This is not a savings or investment product and has no cash value unless a valid claim is made.
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Suicide or intentional self-injury in the first year. The policy will be cancelled if within the first year you die as a result of suicide or intentional and serious self-injury or an event where, in our reasonable opinion, you took your own life.
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You're covered only for the policy term. You're covered for your chosen length of policy until the expiry date, unless the amount of cover is paid out, or the policy is cancelled by you or us. Cover will stop when the policy ends and no further premiums will be payable.
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If your life insurance is to cover your mortgage, your policy may not completely pay off your outstanding mortgage unless you make sure your cover amount is adjusted to match any new mortgage arrangements. If you take out Decreasing Life Insurance you should also check that the interest rate on your mortgage does not become higher than the rate applied to the policy. The rate will be shown in your Personal Quote or the Policy Booklet.
What is Decreasing Life Insurance?
Decreasing Life Insurance, often called mortgage life insurance, is designed to help protect a repayment mortgage when you buy a home. It pays out a lump sum of money if you pass away while covered by the policy or are diagnosed with a terminal illness and your life expectancy is less than 12 months. With this type of insurance, the amount of cover reduces roughly in line with the way a repayment mortgage decreases. The payout could mean your loved ones get to stay in their family home without the worry of mortgage payments after you're gone.
Family protection – level cover & increasing cover
Your insurance provider will pay the same premium for this cover each month until your policy ends, and the lump sum payout stays the same throughout the time you hold the policy.
If you die during this time, your loved ones could use the lump sum to help them pay off debts or put it towards living costs and monthly outgoings, such as rent.
Protecting your cover from the effects of inflation
With level cover you choose a lump sum payout, but over time that could be worth less due to inflation.
You can help protect this lump sum payout against inflation by selecting increasing cover. The payout will then increase in line with inflation over time.
For example, a £100,000 lump sum would still be £100,000 in 20 years' time, but it may not buy you as much as it would now because the cost of goods and services has gone up with inflation.
With this cover, insurance provider will increase the value of the lump sum payout in line with the Consumer Prices Index (CPI), calculated over 12 months. To work out the increase to your premium, the provider multiplies what you pay by 1.5 and the percentage increase in CPI. If the CPI stays the same, neither your cover nor your premium will change over that 12-month period. The maximum yearly increase would be 15% to your premium and 10% to your cover.
Can I have more than one Life Insurance Plan?
Yes, you can have more than one life insurance policy.
If you want to take out extra life insurance cover, you don’t have to stick with your current insurer. You can have multiple life insurance policies with multiple different providers.
Do I need a medical to get life insurance?
This depends on your age, the cover amount and the information you gave us about your health on your application. Most people who apply for a cover don’t need a medical. However, if you're applying for a large amount of cover, insurance providers might ask you to have a medical with either a nurse or a doctor. Insurance providers look at everyone’s application individually. If you're asked to have a medical, it’s so they can learn more while they assess your application. It doesn’t automatically mean your application won’t be accepted.
When should I get life insurance?
You can get life insurance whenever you like, but it’s worth noting the cost tends to rise as you get older. Some life events may make you think you need life insurance, like buying a home, getting married, or having a child. You may want to make sure you’re looking after anyone who is dependent on you should anything happen to you.
What is the average cost of life insurance?
We take many factors into consideration when pricing our life insurance, but our Life Insurance Plan starts from as little as £5 a month. There is no average cost as the price you pay depends on the level of cover you choose, the duration and your personal circumstances.
What type of life insurance do I need?
It really comes down to your personal circumstances and what you want the cover for. There’s no right or wrong type of life insurance, and, as we’ve seen, you can have more than one type of policy at the same time.
Feel free to contact us for your free consultation.
Life insurance FAQs
Do I need life insurance?
Whether you need life insurance will depend on your individual circumstances. For example, life insurance can provide peace of mind for people with children, partners or spouses that depend on them financially, as well as people with a mortgage on the family house.
Do I need Critical Illness Cover?
A critical illness can affect anyone at any age and can turn lives upside down. Having a back-up plan in place can alleviate some of the financial stress of the situation. Some people may use their savings to supplement their loss of income, others may rely on an employment benefit package, while others may find that some form of critical illness insurance is their best option.
Can I cancel my Life Insurance Plan at any time?
Yes, you can.
You can cancel your policy at any time.
Remember, your life insurance policy is not a savings or investment plan. It only pays out on a successful claim. By cancelling you won't be able to make a claim. If you're thinking of cancelling your insurance, speak with us. We can help you consider other options.
Should I put life insurance in a trust?
If your life insurance policy is in a Trust, we may be able to pay the claim quicker than if your policy isn’t in a trust, provided there is at least one surviving trustee. It could also help keep the payout outside the scope of Inheritance Tax. If you're considering a trust, talk to a financial adviser. Bear in mind that tax rules may change in the future. You may need to speak with a financial adviser. Please be aware that you may need to pay for this advice.
Is a life insurance payout taxable?
If you receive a life insurance payout, you won't need to pay capital gains tax, or income tax - but you might need to pay inheritance tax, unless the money is placed in a trust.