Life Insurance is a policy you can have which protects your family or mortgage against the risk of death or critical illness diagnosis.
What is life insurance? It’s protection that’s designed to take all financial strain away. When someone passes away or is diagnosed with a critical condition, the emotional effects on them or their surrounding network of people can be devastating, but the financial effect can also be just as hard-hitting. Life insurance ensures that difficult times can be made more bearable.
Life insurance cover is paid out as a lump sum death benefit and there are various types of life insurance policy available. Term life, level life, decreasing life, but what does it all mean? can I afford the premium payments? do I need life insurance? Life insurance is actually surprisingly simple and can have much lower premiums than people expect. Let’s look into a life insurance policy and if it really is worth the money.
What is life insurance and how does it work?
Put quite simply, you are insuring your life, so if you pass away a lump sum of money will be paid out. You can choose the amount that the lump sum is going to be. What’s the catch? there isn’t one! As part of the application process, you will answer health & lifestyle questions which allow the insurer to assess that they are happy with the risk they are taking on. Once accepted they will insure you straight away. If you died, as long as your monthly premiums are paid and up to date and you don’t take your own life in the first 12 months of the policy, then the lump sum you have chosen will be paid to your loved ones.
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What types of life insurance are available in the market?
Life insurance can be tailored to meet your needs and there are several types of life insurance policies in the market. With life insurance, you can have multiple policies and insure yourself as many times as you’d like. Whilst the below is not an extensive list, it does include the most popular types of life insurance that people tend to go for.
Term means the length of time you are insured for. The minimum term you can insure yourself on a policy for is 5yrs and up to a maximum of usually around 50yrs.
Decreasing Term Insurance
Decreasing term insurance can also be called mortgage protection. This is a policy where you would normally match the amount you’re insured for (the sum assured) to your current mortgage amount. The sum assured then tracks down over time in line with your mortgage reducing, meaning that the lump sum pay out will reduce but will always be enough to pay off your mortgage loan entirely.
Level Term Insurance
Level term insurance can also be called family protection. This is a policy where the sum assured is fixed and does not change for the policy term. People often use this life cover when they have a fixed amount of money that they would like to leave behind for their loved ones. Some people choose to have this type of policy in addition to a mortgage protection policy, so that they know that the mortgage loan will be paid off as well as some extra money left over. You can usually get an extra discount for having multi benefits.
Critical illness Insurance
Critical illness insurance is a comprehensive cover that can be added to your life insurance policy for an extra level of protection. Whilst a life insurance policy pays out on death, a critical illness policy pays out if you are diagnosed with one of the critical conditions they cover whilst you are still alive. There are a whole range of conditions that are covered with the highest claim rate on critical illness being for Cancer, Heart Attack, Stroke and Multiple Sclerosis. Critical illness has a much higher percentage chance of being claimed on than life insurance so it does usually come with a higher premium attached to it. Some people liken it to the levels of car insurance, with critical illness being like the comprehensive cover, whilst life insurance third party fire and theft!
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What does life insurance pay for?
If an eligible claim with the life insurance company is made and you receive the payout, this will be paid directly into your nominated bank account. The money is then yours to do as you wish. Whilst decreasing term insurance is usually to cover your mortgage loan, it doesn’t mean you have to use the money for that. You may for example choose to pay off part of your mortgage loan and then use the rest of the money to pay off some other debts, subsidise income, go on holiday to get away – the list is endless!
When does life insurance not pay out?
The claims statistics for life insurance are available on each insurer’s website. There is a slight misconception that life insurance doesn’t payout, but this is a myth, and the insurer’s claims figures back this up! In 2019 the claims reports for the top 3 insurers in the market for the percentage of life insurance claims that were successful were 99%, 99% & 97%!
What is the best life insurance UK?
There are lots of excellent life insurance policies out there in the market with various insurers. Their individual websites are the best place to find out about them if you want to do your own research, however, it is advisable to find a broker to help you find the best type of life insurance policy for your needs.
What is the average life insurance cost per month?
The cost of life insurance will vary depending on how much life cover you would like, the type of cover you would like and how your health is at the time of application. Factors such as your age and whether you smoke will also change the premium. For a younger person who doesn’t smoke and is fit and healthy, the premiums can be as little as £5 a month. The older you become, the more your health can decline and your life expectancy can decrease which will increase the risk and subsequent premium of the cover. That means that the sooner you can think about getting cover in place the better.
Is life insurance only for people who have children?
Not at all! When you have children dependant on you the need for life insurance cover is usually heightened, however, it can often be the case that in a couple one person’s income outweighs the other so the need for a safety net is still there whether children are involved or not. You could also argue that a single person with no kids does not need life insurance, but with policies such as the critical illness insurance you can protect your finances so you can afford to pay the household bills and living expenses whilst you may not be able to work so you can concentrate on getting better.
How can I get the best life insurance quote?
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There are many Insurance companies in the UK all offering different types of life cover. The best way to be certain that you are not only getting the right cover but also the lowest price is to use an insurance broker.
An Insurance broker will shop the insurance market for a life insurance policy and work independently so won’t be tied or swayed towards certain insurers.
At YesCanDo we are a whole of market insurance broker. This means that we will search the market to get you the best price for the best cover. We have a team of in-house insurance specialists that will be on hand to advise you and get you various cover options to consider. Once agreed and you are happy, one of our amazing team will see your application through to completion, keeping you updated each step of the way. We are a FEE-FREE Insurance broker, therefore, we do not charge you for our services.