What Kind of Policies Are There

It’s easy to put off getting life insurance. That’s why we’re here to help you protect your loved ones today, so you don’t have to worry about tomorrow. 

Life insurance is protection for you and your family. If the main breadwinner of your family were to get seriously ill or die, this would have a huge financial impact. Life insurance can help give your family peace of mind that if something terrible does occur, they’ll be provided for. 

It’s easy to put off getting life insurance. That’s why we’re here to help you protect your loved ones today, so you don’t have to worry about tomorrow.

Life insurance is protection for you and your family. If the main breadwinner of your family were to get seriously ill or die, this would have a huge financial impact. Life insurance can help give your family peace of mind that if something terrible does occur, they’ll be provided for.

There are 2 main types of life insurance policies:
• Life Cover – this will provide a lump sum to your dependants if you die
• Serious Illness Cover – this can provide you with a lump sum payment if you can’t work for medical reasons such as a heart attack, cancer or a stroke

If you don’t have any dependants, you may decide you don’t need life insurance. However, if you’ve a partner or family who depend on your income, to cover a mortgage, for example, it’s worth looking into.

Another factor to consider is price. If you’re young and healthy, a cheaper life insurance offers good value for money – giving you high cover at a relatively low cost. If you take it out later in life, it may cost you more yet you may have more need for it as you’ll be more likely to have health issues.

The terms life insurance and life assurance are often used interchangeably – although strictly speaking they mean different things.

Life insurance is protection for a specified amount of time. If the policyholder dies during the term of the policy, the insurance company will pay a sum to their beneficiaries. If they outlive the term of the policy, their beneficiaries will not receive any payment. Therefore, the payment is insured, rather than ‘assured’.

Life assurance on the other hand means the policyholder is covered until they die. It’s also known as ‘whole of life’ cover. With life assurance, a payment is typically made when the policyholder dies.

Throughout our website we use the term ‘life insurance’ to apply to both term and whole of life cover.

With level cover, the payout you receive stays the same throughout the term of the policy. Level cover is often used for protecting personal loans and debts, university fees, funeral costs and other expenses. Keep in mind the payout from level cover does not keep up with inflation, you can however add an optional automatic indexation or inflation option if you so wish.

Decreasing cover also known as mortgage protection insurance, the insured sum decreases over the term of the policy. This means your monthly payments will be lower than with level cover, although the amount you pay will stay the same throughout. If you want to protect a regular capital & interest repayment mortgage, decreasing cover could be suitable and is more than often a requirement by your mortgage lender.

As the name suggests, single cover protects one person. It’s tailored to the insured person’s needs and pays out once when they die.

In contrast, joint life cover protects the lives of two people. The same cover amount applies to both of the insured people and it pays out once when either person dies, at which point the policy ends.

Dual cover also protects the lives of two people but a claim can be paid on both deaths. If one person dies, the policy continues in the name of the survivor.

• Pays out a lump sum if you die
• Covers you for the whole of your life (however long you live)
• Usually more expensive than term life insurance

This kind of cover does what it says on the tin: insures you for the whole of your life. It guarantees that your partner or family will receive a lump when you die, whenever that happens – as opposed to term life insurance, which only pays out if you die within the agreed policy term. For this reason, whole of life cover is more expensive.

For many people, term life cover does what they need it to: insures them for the time in their life that their family would need financial support. The logic being that, after that time, they’d be able to cope financially without you anyway (because debts have been paid off, children have grown up, and they’re generally more financially comfortable). People typically take out whole of life cover if they have liabilities that will never go away – like the cost of their funeral or inheritance tax.

Royal London have a unique ‘Life Changes Option’, if selected, means for 10% extra in premiums you have the security of knowing that while your cover continues your premiums will cease at age 100, so the maximum amount the policy can cost is fixed.

Even more importantly, it means after having had the policy for at least 15 years, you can choose to stop paying your premiums at any point and adapt your cover to suit your current stage of life, choosing between:

Option A) Protected Cover: A lower amount of money will be paid out on death.
or
Option B) Protected Cashback: Cash-in and end the policy and get up to 70% of premiums paid back.

Put simply: it’s an insurance policy that pays out if you’re diagnosed with one of the illnesses or conditions listed in your policy. It pays out a tax fee lump sum if you need to make a claim, which can help protect you against the financial impact a serious diagnosis can have – often significantly and unexpectedly.

The most common claims on this kind of policy are for cancers, heart attacks and strokes, but most policies will also cover a range of other serious conditions, like multiple sclerosis, loss of limbs, and major organ transplants. Partial pay-outs are also possible on more minor diagnosis.

There’s two main types: standalone and accelerated or combined. For both types of policies, you can either buy level, increasing or decreasing cover – which means the payout always stays the same, goes up over time, or goes down. Beyond that, here’s a breakdown of each:

Standalone cover
This is an individual insurance policy that only covers you for illness (namely: the serious illnesses listed in your policy).

Accelerated or Combined cover
This is a serious illness insurance policy combined with life insurance cover, meaning you’re covered for both illness and death – whichever happens first. Remember: it only pays out the main benefit once, so if you claimed for a core critical illness, you’d no longer be covered in case of death.