Life insurance FAQs

Before taking out life insurance, we understand that you may have many questions to ask.

We have made a list of the most common questions customers looking to take out life insurance tend to ask.

If your question isn’t on the list or you want to know more information then please do contact us.

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What is life insurance cover?

Life insurance (also called life assurance) pays out a lump sum when you die. The intention is to help provide financial support for your loved ones when they can no longer rely on your income.

The insurance payout could support your family with payments such as the mortgage, everyday outgoings such as food, bills and outstanding debts as well as funeral costs.

You, as the insured, design your policy for how much you want to be covered for in the event of death.

Do I need life insurance?

To have life insurance is not a legal requirement, such as car insurance. It falls down to being your own personal choice.

To make your decision, you can base it on your financial commitments as well as general outgoings. If you are already stretched with your outgoings, only take out a policy if it is feasible to do so. Also, some people base it on their current lifestyle.

Younger, single people may not feel the desire to take out such insurance whereas a married parent may have more of a commitment to obtain a policy.

Who can apply for life insurance?

You must be a UK resident and at least 18 years old at the time of applying.

What type of life insurance can I get through

We offer 2 types of life insurance: Term insurance and Whole of life insurance.

Term insurance is where you outline how long you wish your policy to run for, for example 25 years, and then if you die within that period, whether it is year 1 or year 25, the level of cover would be the same.

Of course, if you died after the policy had expired you would not have a payout as the policy would have ended and you would have outlived your policy.

There is also decreasing term insurance where the payout will gradually get smaller over the term. As an example, if you died within one year, your policy might pay out £100,000, but then may only pay out £,1000 if you died in the last year of your policy. This is most often linked to repayment mortgages, with the amount borrowed reducing over time as you pay off your debts.

Whole life insurance is simply a policy that covers you from the moment you take out the policy, until death, leaving a final payout, as specified by you, to leave behind for your family.

Providing you maintain the payments, the policy will be around for as long as you are around. Whole Life insurance is generally a more expensive cover option, but it is the one that protects you the longest.

How much should I get insured for?

The sum insured depends mostly on your personal circumstances. For example, if you have one child and a smaller mortgage, you will need to be insured for less than a person with a large mortgage and more dependants.

Some insurance guides suggest you have a level of cover of up to 10 times your annual salary. Though before guessing a figure that potentially could increase your premiums, you should work look at all of your finances in a realistic manner.

How much will life insurance cost?

The cost of life insurance can be from as little as £6 per month, but as with all insurance policies, your premiums will depend on a number of individual circumstances.

Will my premiums change?

Term insurance premiums are typically the same throughout your policy term.

Whole of life insurance can be slightly different, with changes in rates as well as if your circumstances change.

If you have a policy that will last the same amount of time as you do, then the policy will need to be updated along the way, for example, you may have more children, your health may change or your finances may change. The insurance provider may also fix your premiums. It will be clarified at the time of taking out your policy by your chosen provider.

What if I have life insurance through my employer?

Having life insurance through your employer is a great benefit, but it is worth checking what your policy covers you for in the event of a payout, paying close attention to the amount it will payout and if it will give your family the required financial security you wish for them to have.

A note to also make is that if your employment ends, your policy will end also.

I have an ongoing illness; can I still take out a policy?

If you have pre-existing medical conditions, some insurers may not be able to provide you with an insurance policy.

There are many different inclusions and exclusions when it comes to life insurance. You must always read your policy documents to see what these exclusions are.

Using diabetes as an example, it may still be possible for you to apply for a policy but the insurer may load the premium, (charge a bit more), to cover the increased risk to your health.

At the quotation stage of your policy, our advisors will go through the exact exclusions and inclusions and advise on the way forward for you.

What happens if I have a policy and my circumstances change?

You should update your policy with your provider if there are any changes in your personal circumstances.

For changes such as mortgage increases, marriage or civil partnerships, or becoming a parent, many providers offer what they call a ‘guaranteed insurability’ option so you can increase your cover without going through medical checks.

Are there common exclusions I should look out for?

As with any insurance policy, you must always read the small print to make sure you understand the level of cover and the exclusions listed by your insurance provider.

A very common exclusion on almost all life policies is that a payout will not be made if the cause of death is suicide or drug and alcohol abuse, as this is deemed not to be death from natural causes.

There may also be exclusions relating to dangerous sports or hobbies, for example rock climbing, so always declare these on your application.

What is critical illness cover?

Critical illness cover pays out a lump sum if you are diagnosed with one of the more serious conditions listed on your policy, within the policy term. The lump sum is usually tax free. It can often work out cheaper to combine critical illness cover alongside your life insurance.

However, you should be made aware that when you have combined policies, only one policy will pay out. For an example, if you claimed on your critical illness policy, then you will not have a second payout when you die.

Can I ensure my partner or spouse onto my life insurance policy?

Joint policies are available and can often work out cheaper when taken out at the same time.

The main thing to bear in mind when having a joint policy is that the policy will only pay out once, which will usually be on the first death. The policy will then lapse. A new policy could be taken out again, however, the premiums are likely to be more expensive due to you being older and possibly having more health issues.

Could my policy pay out a regular monthly income instead of a lump sum?

Yes. When taking out the policy you can opt for your family, after your death, to receive what is normally called family income benefit, which entitles your family to receive your cash payout, split down into a regular income. This way you don’t have to worry so much about investing the money or any management fees.

Is an insurance lump sum payout tax deductable?

Under current UK law, insurance payouts are free from income and capital gains tax. However, they are potentially liable for inheritance tax, depending on the value of your estate you can write your life policy as “in trust” which means it will be treated as being outside your estate and go straight to your listed beneficiaries.

What happens if I outlive my policy?

If you outlive your term policy, you will not receive any payout or lump sum for the amount you have paid in. There is only a payout on death, during the term of your policy. This is where many people opt for Whole Life cover so that they have the peace of mind that their policy is active for the duration of their lives.

Are there any ways of reducing premiums?

There aren’t exactly any hidden ways in how you could reduce your premiums. Life insurance is assessed on multiple factors such as your age and health; so of course, the older you are the more likely it is you may have some health issues.

However, by looking at things to keep on top of these health issues could dramatically reduce how much you pay for your policy. Look at your fitness, do you smoke, do you drink more than the average guidelines, are you classed as overweight for your height? All of these could help you cut down the premiums.

Another thing would be to shop around. Premiums vary from insurer to insurer, so comparing prices may just pay off. We work with some of the best names in the insurance market, so finding a deal that could save you money could be right at your finger tips.