Knowledge Base

Life insurance is a type of policy designed to financially support your loved ones when you die. It can offer peace of mind that your death will not have a detrimental impact on your family’s finances by helping to pay for funeral costs, debt repayments or helping maintain their living standard whilst grieving.

You will pay a monthly premium to the insurance provider for the duration of the policy. On your death, your beneficiaries will receive a payout (subject to the terms and conditions of your policy). The amount of premiums you pay and the lump sum amount depends entirely on your individual circumstances and your choice of policy. Your age, smoker status, occupation and other factors may be considered.

There is no one-size-fits-all when it comes to the cost of life insurance as it is based on your individual circumstances. For example, the average cost of monthly premiums in the UK is approximately £8 per month for every £100,000 of cover, based on a 35-year-old male non-smoker with no underlying health conditions or dangerous occupations or hobbies. It is important to compare your options to obtain a bespoke quote that is more accurate to you, you can get started with us by applying for a quote.

Whole-of-life insurance does exactly what its name implies; it covers you from the policy start date until you pass away, where your dependents will receive a payout no matter when you die (as long as you meet all terms and conditions). There are two main types of whole-of-life insurance: balanced and maximum. A balanced policy guarantees that your premiums won't change as you age, or as your health may decline. When you take out a maximum policy, your coverage is connected to an investment fund. The insurer invests your premiums in the hope that the investment's return will someday be enough to cover your payout.

With term life insurance, you are protected for a defined period of time, and if you pass away before the policy's expiration dates, your beneficiaries will receive a lump sum.

If I live past the term policy's expiration date, would my beneficiaries still receive any money?

No, if you pass away after the expiration date, the insurer will not pay out and your beneficiaries will not receive a lump sum.

Family life insurance isn’t a specific product, it’s a term used to describe a life insurance policy designed to provide financial protection and support to a policyholder's family in the event of their death.

It assures you that your family won't face financial strain if something happens to you. Whether it's covering funeral costs, paying off debts, or ensuring they can maintain their usual lifestyle during a difficult period, it provides a sense of security and peace of mind.

Family income benefit is a type of life insurance policy that ensures your beneficiaries will receive regular income for a set period of time, as opposed to one lump sum of money. Usually, you inform the insurer how much money your family will need if you are no longer around and they base the premium cost on this. Family income benefit could help your family pay the bills or keep on top of mortgage payments if the worst were to happen to you. It differs from an ordinary term life insurance policy in that the amount paid out decreases over time, for example, if your coverage lasts 20 years and you die in the 15th year, your beneficiaries will receive 5 years' worth of payments as opposed to a predetermined lump sum amount.

Critical illness cover is a type of life insurance policy that pays out if you are diagnosed with a serious illness specified within your policy terms. The tax-free payment can be used for whatever you need during your illness such as covering a potential loss of income for you and your family or adapting your home e.g. for wheelchair access.

What critical illnesses are covered?

Which illnesses are covered depends on how comprehensive your policy is, so it varies on an individual basis. Typically, insurers often cover strokes, heart attacks, some cancers, traumatic head injuries, and other major illnesses.

When might a critical illness policy fail to payout?

The most common reasons insurance won't pay out are misrepresentation and failure to comply with the policy terms and conditions, but there are other possible reasons that can vary on an individual basis. Misrepresentation occurs when crucial details are omitted from the application when the policy begins, such as failing to disclose how much you actually smoke and drink before attempting to claim for liver or lung cancer.

Terminal illness cover is a type of life insurance policy that pays out if you are diagnosed with a serious condition or incurable illness and have a life expectancy below 12 months. The tax-free payment can be used however you like upon payout, such as making up for the potential loss of income for you and your family.

Over-50s life insurance is a whole-of-life policy that can be taken out between ages 50 and 80 that lasts from the policy start date until you die. When you pass away, it will provide for your loved ones financially. It can provide reassurance that your passing won't have a negative financial impact on your family by helping to cover funeral expenses, debt repayments, or helping them maintain their standard of living while grieving.

Decreasing life insurance is a policy that pays out less money over time and is sometimes referred to as mortgage protection insurance since it is commonly used to pay off the outstanding balance on your mortgage in the event of your death. So, as your outstanding mortgage decreases with the repayments you make, your potential insurance payout amount decreases too.

Increasing life insurance is a policy where the payout and the premiums rise in line with inflation with the aim of counteracting any value lost, usually up to a maximum of 10% annually. As your potential payout amount is increasing, the cost of your premiums will increase too.

Joint life insurance covers two people but usually only pays out once, either to the survivor after the first person on the policy dies or to beneficiaries after both people die, depending on whether you have a first-death or second-death policy.

A policy with variable life insurance incorporates stock or bond investments to increase cash value, which causes the potential payout amount to change based on the success of the investments. A variable policy is a higher risk because your premiums are invested in the stock market, so the value of your payout will increase or decrease depending on economic conditions. If your investments don’t perform well, you could end up with a lower payout. That said, if your investments perform well, you could see a much higher payout than other options. Most variable life insurance products also utilise compound interest so you can maximise the returns on your investment if you start early and invest for a long period of time.

Although having life insurance is not a legal requirement when applying for a mortgage, certain lenders may make it a requirement or at the very least strongly advise taking out a policy. Your mortgage is likely the largest debt you will ever incur. If you were to pass away unexpectedly, this debt could be left to your dependents to deal with. By taking out a life insurance policy to provide a lump sum upon your death, your loved ones won’t have to worry about losing their home or keeping up with repayments.

Regardless of your age and health, tragedies happen every day. life insurance policies are designed to insulate your loved ones from the financial burden your death could otherwise cause. If you have a partner, children, or other dependents then life insurance could be something to consider to enable them to pay off your debts, cover funeral costs and maintain their standard of living if the worst were to happen.

As a single parent, you’re more likely the main source of financial support for your children. A life insurance policy could provide a lump sum or regular payments to your dependents if the worst happened to you. This could ensure they are able to stay in the family home and cover childcare or educational costs when you are not around. It is never nice to consider the possibility of leaving your children behind, but as a single parent, it is important to consider the implications of something unexpected happening to you.

People with chronic illnesses are accepted for life insurance policies every day, premiums may be slightly higher, although this is determined case-by-case. Researching and comparing life plans is important because not all providers have the same perspective on pre-existing conditions. Life insurance policies can come with or without exclusions. Insurers may offer a policy with exclusions if they decide that your pre-existing condition is too severe to qualify for coverage. It is possible for insurers to provide a policy that covers any future illnesses, but not pay out should your pre-existing condition cause your death.

Yes, you can take out more than one life insurance policy. There is no legal limit to how many policies you can take out, and when you die it is possible for your beneficiaries to make a claim on each policy. An example of having more than one policy is having mortgage cover and family income benefit at the same time.

Inflationary pressures cause the cost of goods and services to rise over time. As a result, if your prospective life insurance payment remains fixed, the real value will be reduced in line with inflation. This is why some people take out increasing life insurance to counteract the cost of inflation. By continually increasing the cost of the premiums you pay, the potential payout amount increases too. For most increasing life insurance policies the amount will automatically rise in line with the Retail Price Index (RPI) up to an annual increase of 10%.

If you work in a high-risk occupation, such as being in the armed forces, a firefighter, a roofer, a pilot, or a deep sea diver, your life insurance premiums will most likely be higher. This is because these occupations are perceived to have a higher level of danger and therefore a larger level of fatal risk, increasing the likelihood of your beneficiaries making a claim.

Hobbies that are perceived to have a higher level of danger carry an increased risk of fatality and therefore an increased risk of a claim being made. This is why many insurers may charge more for individuals who partake in dangerous pastimes such as scuba diving, skydiving, or hang-gliding.

You can take a life insurance policy out on anyone that would cause a financial loss to you when they die, for example, if someone owes you a large amount of money. In the simplest terms, you can insure anyone as long as there is ‘insurable interest’.

What is ‘insurable interest’?

The Association of British Insurers defines insurable interest as “the interest that a person has in something such as a particular property or another individual, which means that the person would suffer a loss should that property or individual be harmed.” It is essentially a valid reason to insure somebody if their death would financially impact you.

Can I take life insurance out on my parents?

If your parent's death would significantly impact you financially, you will have thereby proved that there is an insurable interest and can then take out a life insurance policy on your parents.

Can I take life insurance out on my partner?

If you are married or in a civil partnership then there is no need to prove insurable interest as you can insure each other through either a joint life insurance policy or two single ones.

Can I take life insurance out on my sibling?

If your sibling’s death would significantly impact you financially and prove insurable interest then you can take life insurance out on your sibling.

Can I take life insurance out on my business partner?

Yes, key person insurance protects against the death of a specific person within a business, usually one of the owners or key shareholders. It is designed to pay out to the company if this person was to die so the business can keep functioning during these difficult times.

Can I take life insurance out on someone without them knowing?

No, unless the person you are looking to insure is your child or grandchild and you can sign on their behalf, you cannot take insurance out on someone without their consent

Yes, people with preexisting conditions get accepted for life insurance policies every day, but as they are seen as higher risk by insurers, it can cost a little more. Everyone is assessed on a case-by-case basis so there is no blanket rule when it comes to preexisting conditions. Insurers may offer a policy with exclusions if they decide that your pre-existing condition is too severe to qualify for coverage. It is possible for insurers to provide a policy that covers any future illnesses, but wouldn’t pay out if your pre-existing condition causes your death.

Most insurers will stop accepting new life insurance applications when you reach around 80 years old. Some providers such as Legal & General and Aviva stop at 77 and some stop even younger at 70. Insurers have to try and balance the money you pay in monthly premiums with the final payout amount and the older you get, the less likely you are to be able to afford monthly premiums that would allow for both a payout upon death and a profit for the insurer. Therefore, it is important to compare your options before you reach 70 years old or older.

For many of the major life insurance providers, you generally have 30-60 days following a missed payment to catch up. After the specified time period is up, if you have not kept up with payments, your policy will lapse and you will no longer be covered.

The simplest explanation is that life insurance covers your life and is designed to provide a payout to those who may be impacted financially by your death. There are different life insurance products that cover various things, so what is included in your cover depends on your circumstances and your particular policy. Terminal Illness is included in a life insurance policy, whereas Critical illness Cover is a policy to cover less severe illnesses which may or may not be terminal.

Some experts recommend that 10x your annual gross salary is enough life insurance coverage but it really does vary according to your specific requirements. There are certain things to consider like your mortgage amount, the cost of bills and expenses, and the cost of replacing your income for your loved ones’ upkeep.

When you are ready to make a life insurance claim on behalf of someone who has died, the first step is to contact the insurance provider. You will need the name of the deceased, their policy number, and their death certificate, and will need to disclose your relation to them. Anyone can make a life insurance claim but only the named beneficiaries can receive the payout. If no beneficiaries have been nominated in a policy, the proceeds of a claim will go into the deceased’s estate. The process is similar when applying for a critical illness claim, you’ll need to contact the insurer, and provide a doctor's report and your personal information, and they will be able to assess your claim and issue your payout if successful.

A life insurance claim may not be paid for a number of reasons that are individual to each policy. As long as you are honest with your insurer, inform them of any circumstantial changes and stay up to date with your policy expiration date (if applicable) then it is likely your beneficiaries will receive a payout.

The majority of insurers will not pay out in the event of the insured person committing suicide within the first 12-24 months of the policy, and some may refuse a payout if suicide is the cause of death no matter when the policy was taken out, especially in the policyholder withheld information about their mental health. If you have been diagnosed with a mental health condition, you will likely be asked to disclose this to your insurer along with any medication and symptoms so your premium rates and coverage are as accurate as possible.

A fraudulent life insurance claim is one where someone has lied or exaggerated in order to receive payment. This can result in a refusal of any payouts or even criminal charges. A famous example is John and Anne Darwin, a school teacher and prison warden from the UK. The couple planned to fake John's death by him paddling out to sea on a canoe and disappearing to claim £679,000 on his life insurance. The couple were found out and both were imprisoned for over six years.

In the UK, life insurance payouts are completely tax-free. If your estate exceeds the £325,000 threshold your policy may be included when it comes to calculating inheritance tax. This wouldn’t apply when your assets over the threshold are left to a spouse, civil partner, charity, or amateur sports club, or if your life insurance policy is written in trust.

Having your life insurance policy written in trust allows for any potential payout to be given directly to your beneficiaries through a streamlined payment process. Without writing your life insurance policy in trust, any money from the payout is absorbed by your legal estate before being passed to your beneficiaries, and if your estate is valued over £325,000 then anything above this threshold is taxed at 40%.

Yes, you can. Because smoking risks your health and can lead to health problems at a younger age, life insurance companies can often charge higher premiums from those who smoke. According to the NHS, smokers run the risk of developing more than 50 major health disorders, and about 78,000 people in the UK die from smoking-related conditions each year. You may still have to pay higher rates if you use nicotine-containing items like gum, patches, or vape pens. While different insurers have different definitions, for the most part, it doesn’t necessarily matter whether you smoke 20 cigarettes a day or occasionally vape – you’re still classed as a smoker in their eyes.

Different insurers have different policies, but generally speaking, if you stop smoking and abstain from nicotine for 12 months, you are once again considered a non-smoker. Your past smoking habit may still affect the cost of your premium, but it should be much less expensive.

The main difference between life insurance and life assurance is that life insurance is designed to cover the policyholder for a specific term and life assurance is designed to cover them for their whole life. In other words, life assurance can be another way to phrase whole-of-life cover and life insurance is can be another way to phrase term life cover.

death-in-service benefit is an employer-provided policy that pays a tax-free lump sum of cash if you die while working for them. You do not have to die at work or from work-related activities to be eligible for death in service benefits, so long as you are employed by them at the time of your death. Because this benefit is kept in trust, your beneficiaries will not be taxed when they receive a payment.