Life Insurance
Frequently Asked Questions

Life insurance is a way of helping your family cope financially on you dying. It is intended to provide help to your loved ones when they cannot rely on you for income.

The payout can be used flexibly to clear debts, pay off the mortgage or to maintain the everyday lifestyle. It could even pay for your funeral.

If you are single with no one depending on your income, you most likely don’t require life insurance.

However, if you have a partner or family who would struggle to cope financially, then life insurance could offer the financial help they need at a very difficult time.

Your employer might offer death-in-service benefit – this pays out a lump sum, usually four times your annual salary if you die while in employment.

This can be a valuable benefit, however you might need to take out additional cover depending on certain factors, such as how much you owe on your mortgage, as well as other financial provisions for your dependents’ future.

This is the most common type of life insurance; it will only pay out if you die within the duration of the policy stated. For example, if you take out a policy for 25 years, your family can claim if you die during this 25-year period.

However, if you die after that term, there would be no payout.

This is dependent on the life insurance policy bought. If you buy level term insurance,  the payouts are the same whether you die in year one or the 25th year.

A cheaper alternative is quite often, decreasing term insurance, where the payout gradually becomes smaller over the years.

If you choose a decreasing level policy, it is often linked to a repayment mortgage because the amount you owe the lender also decreases over time.   

Another option is family income benefit. This pays an income very much like a monthly salary rather than a lump sum, from the time of the claim until the end of the term.

This is usually cheaper than level or decreasing term insurance because the amount being paid out by the insurer is expected to be less overall. 

You’ll need to consider the reasons for having the cover. Maybe you would like to make sure the policy lasts as long as your mortgage repayments.

Or perhaps until your dependent children reach a certain age so that it won’t expire until they have finished school, turned 18 years old, or finished university.

Your own age will obviously also have an impact on your decision.

Yes, this is called whole-of-life assurance. Your family can claim for your policy no matter when you die, unrestricted by a policy term.

This type of policy can normally more expensive than term insurance, as the insurer knows it will have to pay out eventually.

Level and decreasing term insurance, and family income benefit policies, usually have guaranteed fixed premiums throughout the policy term.

That said, some firms offer ‘reviewable’ premiums, which can be reviewed every 5-10 years and normally go up in price.

This depends on your personal circumstances as the amount of cover, also known as the ‘sum insured’ can be different for each family as every family have their own unique requirements.

You may be married and have a large mortgage and four children; you would need more cover than a single parent with a two bedroom flat with one child.

But obviously, you should be making detailed calculations to make sure you are fully covered. 

The premium will vary depending on the type of policy, the sum insured and the risk of a claim – if for example you are in a high- risk job.

Age is also a factor; life insurance will be more expensive for an older person. Similarly, if a customer is in poor health, they can expect to pay a higher premium.

The insurer will take into account smoking status, occupation, hobbies, lifestyle – such as weight and fitness  in order to help determine their premiums.

In truth, it can be difficult to find affordable life insurance if you have a pre-existing medical condition, especially if it is a serious one.

Some insurers will turn you down straight away, whilst others will exclude the condition itself. For example, if you had diabetes, the policy would not payout if you died from the disease.

You would be covered if your death was not related to your condition, or could be proven not to be.

There are a number of specialists who offer life insurance to those with pre-existing conditions, but be prepared to pay higher premiums because of the high risk of a claim.

Yes, but life insurance premiums rise with age and older people will most definitely pay more for cover.

It is possible to take out life insurance when you are in your 50s, and some insurers will accept without medical or health questions.

Yes – Many couples take out joint life insurance. It could be due to convenience and the fact it is normally cheaper.

Please note that joint life insurance only pays out once (at the first death), and leaves the surviving partner without insurance. 

It is then more than likely that when the survivor wishes to take out new insurance, the premiums will be expensive, because the person will be older and/or in a worse state of health.

If you chose family income benefit, your beneficiaries will receive an income much like a salary on your death.

This is often easier to manage than a lump sum because you don’t need to worry about investing or management fees. The premiums are also typically cheaper because the longer you live, the less the insurer has to pay.

If, for instance, you take a £30,000 a year policy for 25 years then died in year 20, then the insurer would only pay for five years.

Proceeds from a life insurance claim are free from income and capital gains tax, however, they can be counted as part of your estate and therefore potentially liable for inheritance tax (IHT).

If you write the policy ‘in trust’, meaning it is not taken as part of your estate when you die, IHT element can potentially not be applicable.

You can usually make amendments to your policy,  although it may result in higher premiums.

It is advisable to keep your insurer up to date with any changes in circumstances or you might invalidate the cover.

Regular reviews to your policy in order to make any changes , such as marriage, a new home or a new addition to the family is always a good idea.

Always read the small print of any life insurance policy to understand the level of cover and the exclusions.

As many insurers will not pay out if you die as a result of alcohol abuse, suicide or a drug-related death.

It is also difficult to get cover for a pre-existing medical condition, or if you die as a result of a dangerous sport or hobby.

Critical illness cover pays out a lump sum if you are diagnosed with a serious condition during the policy term, so long as the condition is listed on the policy key features documents. Most policies pay out once, therefore if you did claim, your family would not be able to claim again on your death.

The list of conditions is not exhaustive, it is advisable to check the small print for details of the definitions.


You can also add terminal illness cover – where you receive a payout on being diagnosed with a terminal, life-ending illness or condition.

Another common add-on is ‘waiver of premium’, which helps pay the premium when you are unable to work due to illness or injury.

It is cheaper to buy life insurance when you are young. As people get older, they pay more for their premiums. 

Improving your health, such as losing weight and giving up smoking, can also reduce your premiums.

Premiums vary from insurer to insurer therefore you can often save money if you compare prices. 

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