Look after your loved ones after you've gone, and give yourself peace of mind with a life insurance policy.
Life insurance is a type of insurance cover that pays money to your family if you die (or develop a terminal illness) during its term.
What would happen to your family if you died tomorrow? Would they be able to meet the mortgage payments on your home, cover childcare costs or pay the household bills?
Life insurance provides financial support for your family should the worst happen.
Here's how to buy life insurance and how it works should you need to claim:
Deciding how much cover you need is an individual choice. You only want to pay for what you need, but you also want your family to receive enough money if the worst happens. Here are five things to consider when deciding on cover amounts:
When you make your life insurance application, you must tell your insurer everything. If you fail to disclose something, it could lead to them not paying your family's claim.
The insurance company will ask you about matters including:
In most cases, a medical examination is not required when taking out a life insurance policy. It's typically only if you request an unusually high amount of cover.
If your insurer asks you to take a medical, it's best to agree. Otherwise, they may turn down your life insurance purchase.
However, the insurer will probably want to look at your medical records, and you can give your consent, and they liaise with your GP.
When your life insurance claims payout to your family, there is typically no income tax or capital gains tax due on the payout.
However, depending on the value of your estate when you die, inheritance tax (IHT) may be payable.
The most effective way to bypass IHT and guarantee a tax-free lump sum is to keep your life insurance in trust, which means it's managed by trustees and not part of your estate.
Talk to us about this when setting up your policy so we can help ensure your policy is as tax efficient as possible
Life insurance brings several benefits, perhaps the most valuable being reassurance.
Life insurance protects your loved ones in the event of your death. When you die, your life insurance pays out to your family. In addition, your life insurance covers you in the event of a terminal illness diagnosis where your life expectancy is 12 months or less.
Critical illness cover is an additional option that you can take out with your life insurance. If you are diagnosed with one of a pre-approved list of illnesses, you can claim and receive the proceeds of your life insurance policy. The nature of the conditions that are included with your critical illness cover depends on your life insurance provider, the specific policy and how much you pay.
Examples of critical illnesses which may be covered include:
Most of the time, if you die, your life insurance will pay out to your family. In 2020, 98% of lodged claims were paid by the insurer.
However, not all causes of death are covered by life insurance. These may include:
In all cases, check the terms and conditions of your life policy or speak with us.
Most people are eligible for life insurance. However, how much life insurance you need and your life insurance cost depends on many factors, including your:
There are several types of life insurance, each with its advantages and disadvantages.
Level term is the simplest form of life insurance. Just choose the amount of cover you need and the length of the term you want to be insured for.
With level term life insurance, the payout your family receives is the same through the entire term of your policy. Your premiums also remain the same.
For example, if your level cover guarantees a lump sum of £250,000 over a 25-year term, your loved ones receive £250,000 whether you die during the first year or the twenty-fourth.
Decreasing term life insurance means that while your premiums stay the same, the amount your family would receive if you die reduces through the term of the policy.
You can also purchase a family income benefit life insurance policy that gives your beneficiaries a regular monthly income until the end of the term if you die, instead of a lump sum. This is another type of decreasing insurance.
Whole-of-life insurance, often known as life assurance, is continuous rather than having a fixed term. It pays your loved ones a cash sum when you die, whenever that may be.There are two types of whole-of-life insurance:
Balanced cover
Your premiums remain the same throughout the entire term of your policy. The cash sum payout also stays the same whether you die soon after taking out the policy or many years later.
Maximum cover
This is an investment vehicle connected to your insurance. Your provider invests your monthly payments to achieve a more significant cash sum payout when you die. Your premiums and potential payout are variable.
Insurance can be complicated at times, so our priority is to keep things simple and give you the facts you need to make a decision. We don’t rush or push clients in a given direction - it’s vital you come away feeling confident in your choice.
If you take out single life insurance, it will pay out to your family when you die. However, you can also take out joint life insurance with your partner, which pays out when the first one of you dies.
The benefits of joint life insurance are:
The disadvantages of joint life insurance are:
