How Does Life Insurance Work?

Life Cover Policies work in different ways depending on the plan you have. Broadly speaking, there are two main types of life insurance – term and whole-of-life policies.

1. Term policies cover you for a fixed length of time (known as the policy term)
2. Level term cover where the amount of cover is also fixed so it doesn’t matter when you pass away, as long as you do so within the policy term, the amount of money paid out is the same.
3. Decreasing term where the amount of cover gets smaller in time, usually in line with a specific debt (like a mortgage or car loan). For example, if you had a 25-year plan then your dependents would receive more money if you passed away in year five than they would if you died in year 20.

Other types of term policy are available and you may find they suit your needs better. It’s best to speak to a specialist about this.

In contrast, whole-of-life policies have no fixed term. Instead, they cover you for the entirety of your life. That’s right, the whole of your life. This means that they’re guaranteed to pay out. As you’d expect, these policies tend to be more expensive than term cover because of this guarantee.

Do I Need Life Insurance?

It’s tough to say. Everybody’s situation is different. However, as a general rule, if someone depends on you financially, then you need life insurance.

Here’s Some Statistics Why UK Families Need Life Insurance:

1. The average cost of raising a child to the age of 21 in the UK is £230,000
2. The average UK mortgage has £137,934 left to pay off
3. 26% of UK residents say their savings would only last one week

Leaving a lump sum payment means loved ones could pay off the mortgage and stay in the family home. Or, have enough financial support to make ends meet.

When Should I Get Life Insurance?

If you don’t have dependents, there are still reasons to get life insurance. You may want to consider a policy to cover the cost of a funeral.

Additionally, it’s worth knowing that life insurance becomes more expensive as you get older because of the associated decline in health. Therefore, if you’re thinking about taking out a policy, it’s better to do it sooner rather than later.

So while buying a policy in your twenties or thirties might feel premature. It can be far more cost-effective than buying one in your forties.

Family Protection vs Mortgage Protection

Generally speaking, Family Protection and Mortgage Protection policies are both the same thing; they’re both term life insurance policies. They’re separated to clearly distinguish the objective of the policy. That’s all really.

One of our experienced advisors will ask about your situation so that they can make an unbiased recommendation. For instance, if you have £150,000 left to pay on your mortgage. One of our specialists will recommend at least this amount. Since it covers your mortgage, we will label this as mortgage protection cover.

What is Critical Illness Cover?

Critical Illness Cover (CIC) is typically an addon to a life insurance policy. However, you can get a CIC policy on it’s own. Unlike a typical life insurance policy that pays out after death, Critical Illness Cover will pay out once you’re diagnosed with a critical illness.

This helps as most critical illnesses will prevent you from being able to work. Therefore, the pay out prior to death will help you financially during a difficult time.

For more information on CIC, visit our Critical Illness Protection page.

Why Get An Over 50s Plan?

As the name suggests, you need to be at least 50 to buy an over 50s plan.

They work in a similar way to other life insurance products as they pay out in the event of your death but they do have some key differences:

1. Guaranteed acceptance – no matter what your lifestyle and state of health is and there is no medical.
2. Guaranteed pay out when you pass away – whereas claims for life insurance will need to meet all the policy conditions.
3. Fixed premiums – for the length of the policy which can be good for budgeting.

See more information on over 50’s plans.

Find out more about life insurance

When it comes to life insurance, there’s a lot to think about and it’s well worth considering all the options to ensure you find the policy that best meets your needs.

We offer our protection services on an advised basis which ensures that all our advisers are fully trained regularly with the up to date changes in the market.