What is life insurance?

If you work and have dependents such as children, a partner or other relatives who depend on your income, it might be worth taking out life insurance to ensure that your loved ones can cover the mortgage and other living expenses should you unexpectedly die. When considering taking out life insurance, you should ask yourself whether you have enough money saved up to cover your family’s bills, mortgage and other expenses such as utilities and food should the worst happen to you. If not, life insurance could be a worthwhile option to help ease any worries about your financial future. That said, life insurance isn’t for everyone, and the benefits of taking out a policy will depend on your circumstances.

Are you thinking about taking out life insurance? Financial Advisor UK has a national network of fully FCA-registered and approved financial professionals that you can be matched with to ensure you get the right professional advice, along with the best deals available.  

If you take out a life insurance policy, an insurer pays out cash to your loved ones in a lump sum or in the form of regular payments in the event of your death, bringing peace of mind that if the worst were to happen, your loved ones left behind would still be able to afford everyday living costs. The sum an insurer pays out to your loved ones depends on the level of life insurance cover purchased. You may also want a policy that covers the costs of your funeral.   

Types of life insurance policy 

There are generally two types of life insurance policy available: 

Term life insurance 

This type of policy is for a set period of time (a term). This term is entirely your preference – an insurer can offer 5, 10, 20 or 25 year policies, depending on your needs. Note that this type of policy only pays out if you die during this fixed period. You will not receive a lump sum if the policy runs until the end of its course.    

Whole-of-life insurance 

This type of policy pays out regardless of when you die, as it doesn’t have a fixed term. You will need to keep up with your premium payments to ensure a successful payout in the event of your death. Defaulting on your account or not keeping up with payments could invalidate your policy. 

Income protection/payment protection 

If you are unable to work because of illness, life-changing injury or redundancy, and cannot cover your everyday living expenses, income protection can enable you and your family to continue receiving a regular income through your policy.  

Critical illness cover 

If you are diagnosed at any time with a critical illness that is covered in the terms of your life insurance policy, an insurer will pay out a lump sum to you that is tax-free. This could help cover the costs of mobility aids, full time care and healthcare bills.   

What does life insurance cover me for? 

A life insurance policy covers you in the event that you should die and leave your family behind (who are dependent on you for financial support). If your death is because of a terminal illness, some life insurance policies offer cover for this if you are diagnosed with a terminal condition, but not all do, so it is important that you check the small print before agreeing to a life insurance policy. 

All life insurance policies place details in their terms and conditions on what is covered and what isn’t. Many policies have exclusions, such as death as a result of substance abuse or alcoholism, or by participating in dangerous sports (although it is possible to obtain life insurance cover that specifically covers winter and dangerous sports). 

If you have an underlying or serious health condition when you first apply for life insurance, you may find that an insurer will not cover you in the event that you die and have to make a claim because of that condition. It is however possible to obtain critical illness cover, long-term illness cover or total and permanent disability cover, although premiums for these types of cover will typically be higher than standard life insurance.   

Should I get life insurance? 

If you have dependents who are relying on your income to survive, life insurance is worth investing in so you can be put at ease over money worries. If you are single, have a healthy income that can cover any major expenses such as a funeral or other bills/your mortgage should the worst happen, it may not be worth taking out life insurance cover. If you’re on a low wage and receive government benefits, you may not need life insurance. If you are in doubt as to whether life insurance would be a good option for your circumstances, speak to an independent financial advisor regulated by the Financial Conduct Authority (FCA). Financial Advisor UK can match you with the best advisor for your circumstances from a national network of fully FCA-registered and approved professionals, ensuring that you get the best professional advice along with the most affordable deals on the market. 

Request a life insurance quote from Key Health

At Key Health, we understand that this isn’t an easy subject to think about, but we also know that preparing for the unthinkable is extremely important.

Key Health are experienced insurance specialists working with all of the major insurers to offer the best advice possible. If you’re ready to discuss your requirements, get in touch with one of Key Health’s specialists today.

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