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Life insurance provides financial cover to take care of your family or dependants if you pass away. It could replace the loss of your income, pay off the mortgage and cover the cost of raising children until they leave home, giving you peace of mind that, should the worst happen, your spouse and children will have financial stability at the time they need it most.
What is life insurance?
A life insurance policy pays out a lump sum of money on the death of the policyholder, with the sum insured depending on agreed terms. Should you pass away, life insurance could enable your loved ones to remain in the family home and keep to a familiar routine, as well as providing the financial means for your spouse or partner to be at home with children for as long as is needed.
Policies are available for adults between the ages of 18 and 80. Life insurance might not be needed if you don’t have dependants, although it is wise to look into other types of insurance such as critical illness cover and income protection insurance.
Your policy will run for a set term, which could be until you retire or until your children leave home. The amount of cover needed is based on factors such as the number of dependants and their ages, whilst premiums are calculated taking into account things details your age, your health and your lifestyle.
Life insurance starts from as little as £5 per month, although lifestyle choices such as smoking could increase the premium. It’s a good idea to compare life insurance quotes with a number of providers to make sure your policy covers your individual circumstances at a price you can afford.
Why do I need life insurance?
Life cover can be one of most difficult insurances to talk about, as none of us wants to face the possibility we won’t see our children grow up or reach old age. It’s tempting to think ‘it won’t happen to me’, but that could leave the very people you want to protect in difficult circumstances should the worst happen.
Did you know…?
- 5.7m people in the UK had whole of life insurance in 2015*
- 600,000 people had term life insurance*
- 98% of term life insurance claims were successful in 2015*
- The average outstanding mortgage is £100,000
- The cost of raising a child until he or she is 11 is £85,000
What type of life insurance do I need?
There are a number of different types of life insurance and the right one for you depends on your own personal circumstances. Buying life cover is a big step and it’s wise to seek independent advice before committing to a policy.
Types of life insurance include:
Fixed or ‘term’ life insurance:
This kind of policy runs for a set number of years and pays out if you die within the term. It’s a good option if, for example, you want to make sure dependants will be provided for until they reach 18 or until you retire.
Whole of life insurance:
Whole of life cover runs continually, or until you pass away. It is therefore guaranteed to pay out but premiums tend to be more expensive as a result. Whole of life cover is also known as life assurance.
This is a type of term insurance and can be a cost-effective option if you need a decreasing level of cover throughout the duration of the policy. Potential pay-outs are reduced for each year of cover to reflect, for example, a decreasing balance on your mortgage, and as a result it can be one of the cheapest life insurance options.
Increasing life insurance:
Increasing life insurance might be an option if you think you need a greater amount of cover as the term goes on, such as to meet university fees or if you’re worried about the cost of living rising dramatically.
Over-50s life insurance:
If you’re aged 50 or over, your circumstances could be quite different to those in your 20s, 30s and 40s, especially if you’ve paid off your mortgage or your children have left home. Your reasons for choosing life cover, therefore, might be geared towards covering funeral costs or leaving an inheritance. Over-50s life insurance is guaranteed to pay out, so is a kind of whole of life cover and, as a result, the premiums could be higher. Many insurers offer guaranteed acceptance without the need for a medical.
Joint life insurance:
If you are in a couple, having joint life insurance can often be cheaper than two single policies. But note that most policies only pay out once, on the first death, so if the surviving partner requires further cover, they would need to take out a new, single policy. Don’t assume you would only need single cover if one of you earns the income and the other stays at home with children - if the at-home parent were to die, the working partner might have to give up their job or factor in expensive childcare costs.
With life insurance, the word ‘ guaranteed’ has several meanings! As above, it could show that a policy is guaranteed to pay out, or it could mean that you are guaranteed to be accepted for cover. Guaranteed insurability is different again and allows a policyholder to increase the level of cover in certain circumstances, such as on the birth of a child or on adoption, taking out a larger mortgage or getting married.
These are set for a fixed term initially, after which the insurance provider can review them if your circumstances change. The fluctuation might not suit anyone on a budget.
How do I buy life insurance?
As with many types of insurance, it’s a good idea to compare life insurance quotes to ensure you find the right cover at the right price. ActiveQuote.com is one of the UK’s leading comparison sites, working in partnership with Confused.com, Gocompare and uSwitch, and getting your quotes with us takes less than two minutes!
Simply fill in our short online form to let us know whether you want level or decreasing cover, whether you need a term or whole of life policy and the amount of cover required. We’ll also need to know your date of birth, postcode and whether or not you’re a smoker. Our panel of leading insurers includes:
- Canada Life
- Legal & General
- Old Mutual Wealth
- Royal London
- Scottish Widows
As with many types of policy, the quotes will allow you to weigh up the affordability of premiums with the level of cover provided; the bigger the payout, the bigger the premiums. Optional extras may sound attractive but, if they make the cost too expensive, it might be better to cover the basics for the time being.
If you have questions or need extra help, don’t forget you can speak to one of our specialist advisers on the phone for free, impartial advice.