What is life insurance?
Life insurance, or life cover, is an insurance policy that pays out a lump sum to your loved ones when you die. There’s no restrictions on how they can use the money. It can help them cover things like debt repayments and funeral costs.
Life insurance cover gives you peace of mind that your family will be supported after you’re gone, but benefits you, too. You’ll get any discounts available from leading brands to help you live a healthy life, and rewards for getting active.
What are the different types of life insurance?
There are two types of life insurance policies – term life insurance and whole of life insurance.
The most popular and cheaper of the two is term life insurance, which covers you for between five and 70 years. If you pass away within the policy term, your loved ones receive a lump sum.
If you’re buying a home, you can get term life insurance to cover your mortgage. If you die before it’s paid it off, the policy pays off the remaining amount. So your family can keep their home and not have to worry about the repayments.
Whole of life insurance lasts your whole life so your family get a guaranteed lump sum. The policy ends when you pass away, so the monthly premiums are more expensive.
How does term life insurance work?
You’ll pay monthly premiums. When you pass away, your loved ones will make a life insurance claim, and receive a lump sum.
1. Decide on the type of policy you need – Choose between term life insurance or whole of life insurance.
2. Choose your cover amount – This is the amount of money that your loved ones would receive as a lump sum.
3. Pay your monthly premium – A premium is the payment you make in exchange for your policy by a monthly Direct Debit.
4. Claiming – When you pass away, your loved ones will make a claim with the insurance provider.
5. Payment – Once the claim is approved, they’ll receive a lump sum into their bank account.
How much life insurance do you need?
The amount of life cover you need will vary depending on your personal circumstances. It’s worth thinking about how much:
• Is left to pay on your mortgage
• Other debt you need to pay off
• Money you’d need for childcare or education
• Money your family may need to cover your funeral. In the UK, the average funeral costs £3,989 (Royal London National Funeral Cost Index Report, 2019)
• You can afford to pay on life insurance premiums.
Once you’ve bought a life insurance policy, review the amount of cover you need every year. As your circumstances change, so will the cover amount you need. For example, if you pay off some of your debts or have more children.
What does term life insurance cost?
The cost of your term life insurance plan will depend on things like:
• Your age
• Your height
• Your weight
• Any pre-existing health conditions you may have
• If you smoke
• If you’re employed in a high-risk occupation e.g firefighter
• How much cover you are taking out
• The length of time you want the cover to be in place
Insurance companies may ask for other details depending on the amount and type of cover you require.
What does life insurance cover?
Life insurance covers your family or dependents with a lump sum payout when you die.
What’s covered?
Life insurance covers:
✔ Death – Your loved ones will get a lump sum when you die.
✔ Terminal illness – If you’re diagnosed with a terminal illness with a life expectancy less than 12 months, you’ll receive the payout.
What’s not covered?
Life insurance may not pay out if:
✘ Your policy has expired – If your life insurance policy expires and you haven’t claimed, it won’t pay out to your family when you pass away.
✘ If you stop paying your premiums – If you don’t keep up with your payments, your cover stops.
✘ You die as a result of suicide – If you take your own life, your family might not receive a payout.
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