Life insurance

What are the main types of life insurance cover?

There’s a whole host of life insurance policies designed to suit different requirements. Here are some of the most widely chosen:

Level-term life insurance not only pays out a lump sum to your beneficiaries when you die, but it can also pay out regular sums across a fixed amount of time which is agreed when you take out the policy. This can help your loved ones pay regular financial commitments, such as a mortgage, allowing them to stay in the family home.

Decreasing term life insurance is what it says – a fixed term, life insurance cover which reduces over time, for example, in line with payments on a mortgage. It is generally cheaper than level term life insurance because the amount that’s paid out upon a claim reduces over time.

Whole of life insurance pays out when a claim is made after you die. As long as you have kept up to date with your monthly premiums, the policy will always pay out. It can be used to offset the cost of inheritance tax.

Joint life insurance typically covers a couple. The payment is made, usually a lump sum, when one partner dies during the term of the life cover. The surviving person is, however, then left without any life insurance cover and will need to take out another policy.

Over 50s life insurance pays out a guaranteed amount when you die. The amount paid out tends to be smaller, enough to cover funeral expenses, but because the amount is guaranteed you can plan for how you wish it to be used. It’s worth remembering that if you live for a long time, you may end up paying more than the life insurance cover is worth.

What is level term life insurance?

This is the most basic form of life insurance, all you need to do is choose the level of cover and how long you want it to last for. If you die during this time, the insurer will pay-out the sum assured to your dependents.

The longer the term and the more cover you have will mean your premiums are more expensive.

How Much Does Life Insurance Cost?

There are five main factors which impact upon the cost of purchasing Life Insurance:

• How much life insurance you choose to take out.
• How long you want your life insurance to cover.
• The type of life insurance policy: Level term life insurance / decreasing term life insurance, family income benefit or whole life insurance).
• Your current state of health and any pre-existing medical conditions.
• Whether you smoke or not.

Here’s a comparison of monthly premiums for life insurance cover for a smoker and non-smoker of various ages looking for life insurance of £250,000, looking to insure themselves for £250,000 over 20 years with no pre-existing or current medical conditions: The quotes shown represent the best Life Insurance quotes from across the entire UK market, as of April 27th, 2020.

• Age 30 - £8.62 (non-smoker) £14.65 (smoker)
• Age 40 - £16.71 (non-smoker) £33.90 (smoker)
• Age 50 - £37.75 (non-smoker) £92.03 (smoker)

Can I change my life insurance cover if my circumstances change?

If your life insurance needs change, for example you may have become a parent or your mortgage or salary might have increased; many providers allow you to increase your life insurance policy cover without undergoing any further medical tests. It's best to refer to your life insurance policy documents to check exactly what your policy covers.

Can I complain if I get advice and it leads me to the wrong life insurance policy?

For brokers to sell life insurance, they must be regulated by the Financial Conduct Authority which means you can complain if things go wrong. Some brokers offer 'advice' and some are non-advised', it is always better to take advice because then the broker is responsible for ensuring the product you buy is suitable for your needs and not you. If you buy online or from a 'non-advised' broker, the onus is on you to make sure its right for you and you may not have the knowledge to do this.
Either way if something goes wrong you can complain to any FCA regulated insurance broker and there are strict guidelines and procedures they must follow - ask for a copy of their 'complaints procedures'. If you remain dissatisfied you then have the right to refer your complaint to the Financial Ombudsman Service, an industry complaints adjudicator to which all firms are legally obliged to accept the Ombudsman's decision.

Can I have more than one life insurance policy?

It is possible to have more than one life insurance policy, but it is more likely that buying one policy that gives you all the individual life insurance you need and would be the cheaper option.

Can you claim on your own life insurance policy for a terminal illness?

Some insurers allow you to claim on your life insurance policy if you have been diagnosed as terminally ill and given a prognosis of less than 12 months to live. This would allow you to give up work, put your affairs in order and spend the final months with your loved ones.

Can you get life insurance if you have a pre-existing medical condition?

This will always depend on how serious any condition is. Most people are able to purchase whole life assurance or a term life policy if they have a pre-existing medical condition, but you may be asked to share medical information and send in copies of any tests to the insurer so the best rated life insurance companies can understand the risk level.

You may end up paying more for your life insurance, but if you don't declare any pre-existing medical conditions you may find your life insurance policy is void and you won't be able to claim. For the over 50s a special type of life cover is available - Guaranteed Acceptance Over 50's Life Insurance - which is special because it does not ask any medical questions and everyone is welcome and accepted.

However, it is a more expensive form of cover and there is usually a 12 or 24 month qualifying period before you are able to claim.

How do I choose the amount and length of life insurance cover?

When choosing life insurance, the amount of cover, or sum insured, should take into account the total amount left on your mortgage plus extra to cover any family expenses. Always ensure the term of your life insurance lasts over the full term of your mortgage that way the balance will be paid off and your family will always be assured of keeping their home.

How do I compare life insurance quotes?

At A-Plan Life and Health, we help provide you with a fully advised comparison service from the UK's widest panel of Life & Health insurers. We offer a £50 price guarantee on all like for like new quotes so we are confident that we can help save you time and money.

A colleague told me our employer provides life insurance cover. Can I rely on that instead?

Your employer may provide you with some sort of life insurance policy such ‘death-in-service’ cover as part of an employment package which pays out a percentage of your salary. However, we would not recommend relying solely on 'death in service' as your only life cover. If you move on to another employer who may not offer this benefit, you will find yourself without protection and if you suffered from any health issues during your previous job, you may find it more expensive to take your own level or decreasing term life insurance policy.

Deciding what type of life insurance you need

It is really important you choose the right type of cover for your personal needs.

There are two main types of life insurance, level term and decreasing term.

Level term life insurance is a policy where the level of cover you have stays the same throughout the term of your cover.

Decreasing term life insurance is a policy where the level of cover you have decreases in line with your mortgage repayments, therefore, this type of policy is only recommended if you are looking to specifically protect your mortgage.

You may also want to include critical illness cover on either of these two policies which is possible. This is where you would be covered if you were to be diagnosed with one of the critical illness defined within the policy (conditions like cancer, heart attack or a stroke), every policy is different so it is best to get advice on this type of cover.

Joint life insurance policies are also available which will cover you and your partner, it is important to note that this type of policy will only pay out on the first death during the term of the policy and will then end, leaving the remaining partner with no cover in place. This option can sometimes be cheaper than having two individual policies but we would again recommend getting advice on what type of policy is best for you.