What is life insurance?

How does life cover work?

Typically life cover will pay out a lump sum which can be used to maintain your dependant’s standard of living or repay a debt, such as a mortgage. You choose the amount of cover you want (known as the sum assured) and how long you want it for (the term), and if you pass away within that time, the benefit is paid.

Broadly speaking there are three main types of cover:

• Level: the amount of cover you have remains the same during the term of the policy.

• Decreasing: as the name suggests, the amount of cover you have reduces over time, this is commonly used to protect a repayment mortgage.

• Increasing: this is cover that will increase over time, usually linked to inflation, so that the value of the benefit is kept in real terms over time.

How much does life cover cost?

The monthly premium on life cover can be very reasonably priced; however, a number of factors can influence the cost, including:

• the amount of cover you take and

• how long you take out the policy for

• the type of policy,

• your age

• your health and lifestyle. Generally the younger and healthy you are, the cheaper it will be.

Do I need life cover?

Whilst life cover is not compulsory, if you have someone who is financially dependent on you then you should consider taking out a policy. Life cover can be important for many people; basically as soon as there is someone in your life you would want to be secure financially if you were not around. It is always a good idea to review your needs when you pass a life milestone, for example:- Buying a property - Getting married - Having children.

Ask yourself if your loved ones could survive / be comfortable financially if you were to die. If the answer is NO then you should review your life cover needs. Our life cover calculator helps you to calculator how much cover you may need.

⁠FAQ

I am buying a home, when should I start my life cover?

We’d recommend you start your life cover when you formally exchange contracts, as it is at this point that you become responsible for the property.

I get death in service benefit through my employers – could I use that?

Work benefits are typically intended to replace your income for a number of years to help your family to adjust. If your plan is to use this to clear a debt like a mortgage it might mean you need to look for additional provision for your family to cover other living expenses and costs. It’s also worth remembering that these benefits are only available whilst you are with that employer. As most of us are likely to change jobs a number of times throughout the course of our mortgage, it’s a good idea to ensure you have separate cover in place to support your family no matter what your job situation at the time.

Is my life cover policy guaranteed to pay out if I die?

If you die within the term of the policy then the policy will pay, however, there are circumstances when a provider may not accept your claim, such as non-disclosure of a condition, or information that could have affected the provider’s ability to accept an application. It’s really important to make sure you answer all the application questions in full and as accurately as possible to minimise the risk of non-disclosure. Some policies also apply an exclusion for death caused by drugs or alcohol, dangerous activities, or suicide in the first 12 months of the policy.

Can I still take out life insurance if I have a pre-existing condition?

It depends on the seriousness of your condition. Some providers may decline your application, while others might offer you cover but exclude your condition. Different providers have different stances to underwriting pre-existing conditions, but speaking to an adviser can ensure that you not only get cover, but that you get it on the best terms.

Can I cancel my policy at any time?

You can cancel your policy at any point in the first 30 days and receive a full refund of premiums paid. If you want to cancel your policy after this, you can do so, however you won’t get any money back. You’ll also cease to be covered going forward, so it’s important that you think about it carefully before you cancel. If you’re looking to reduce outgoings it can be possible to reduce cover to fit your budget but still ensure you have something in place should you need it. An adviser can help you to review your options to maximise cover within your budget.