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Ensuring that your loved ones are provided for, whatever happens, is essential. That’s why life insurance, in its earliest form, dates back as far as the Greek and Roman times.
Back in 600BC, ‘benevolent societies’ were set up to care for individuals with deceased family members. And over the centuries, the industry has expanded to protect a whole manner of financial assets.
This guide will run through some of the main types of life insurance products on the market. But please note, if you need further advice on Level Term, Decreasing, Single and Joint Life Insurance, take a look at our guides.
Please note: policies discussed in this article are for information purposes only. If you need advice on specific insurance products, please get in touch with an independent financial advisor.
Life insurance protects your financial assets in the event of you or your partner’s death (if you share financial commitments, like a mortgage or children together).
It is a vital safety net for families and there are many types of life insurance products and levels of protection on the market. The amount of life cover you opt for will be dependent on the policy you choose, as well as your level of health and a range of other factors, such as weight and lifestyle habits.
A life insurance policy can provide:
There is no legal requirement for a person to take out life insurance. It is highly recommended to those seeking a mortgage and may be a requirement, depending on the lenders you approach. But it is a wise thing to consider if you have the following;
Please note: Payment Protection Insurance works slightly differently to Life insurance, as it covers only payments towards your outstanding debts, with no payout to cover other expenses. A lender may encourage you to take out this form of insurance in conjunction with one of their loans. An independent financial advisor can answer any questions you may have about suitable insurance products to take out with a mortgage or other loan type.
If you are a single person with no dependents or debts (like a mortgage) you may still wish to take out a form of life insurance policy. You may wish to cover your own funeral costs, in the event of your death.
Similarly, if you are leaving an inheritance to your loved ones, a life insurance policy can be used to move the funds from your estate and send them directly to your will beneficiaries. An independent financial advisor can help you with advice on this.
Life insurance is a vast industry, designed to cover every eventuality. Therefore, cheaper and more expensive policies are available. The main cost considerations to take into account when shopping for the best life insurance policy include;
Life insurance policies fall into two main types, Whole of Life Assurance and Term Insurance. One covers you for a specific period, the other can cover you for the rest of your life.
Within the two main types of life insurance products, policies fall into a range of sub categories;
Level term insurance (also known as Level Term Assurance) is designed to protect you for the length of an agreed term. Should you die during the length of said term, you should know exactly how much you will leave behind to your loved ones.
These policies can be paid for in monthly premiums. However, if you die after the agreed level term, no payout is made.
Term life insurance policies vary and the premiums you pay for a certain product may increase as the term progresses. Make sure you are aware of this before you buy. Level term policies ensure that the costs for the term are fixed. However, some offers may have what is known as ‘low start,’ this means that the premiums are cheaper in the beginning and may increase over time. Going through an independent broker can help make the selection process easier, as an expert can make you aware of how your costs could change over time.
What are the Benefits of Term Life Insurance?
What are the Pitfalls of Term Life Insurance?
These policies go by two names but refer to the same product, a life insurance policy which gradually decreases over time, in line with a mortgage term. Mortgage protection life insurance is designed to cover the outstanding mortgage balance, in the event the borrower dies over the length of the repayment mortgage term. With these polices the premiums remain the same (in many cases), however, your level of cover would lower over time.
What are the Benefits of Decreasing Term Life Insurance?
What are the Pitfalls of Mortgage Life Insurance?
With a whole of life policy, you are covered for your entire life, so when you die, whatever age that may be, your family (or will beneficiaries) will receive a payout. The funds are made up of the policy premiums paid in for life cover, as well as an investment reserve. The investment portion is designed to grow in the early years of the policy, in order to subsidise what would become a higher premium cost for the ageing policyholder. Provided the policyholder has paid into it for the entire length of the policy, and the investment grows over time, the policy can be used to pay your inheritance tax bill in advance (if your estate is chargeable for this type of tax). These policies can also be written In Trust, to prevent delays in inheritance funds going to your loved ones after your death.
What are the Benefits of Whole of Life Insurance?
What are the Pitfalls of Whole of Life Assurance?
These are specialist insurance products for the over 50’s market. As they are aimed at older customers, the premiums for this type of insurance can be relatively cheap. However, the payout will also be smaller, in many cases. A policy of this type may be taken out to cover funeral expenses, for example.
What are the Benefits of Over 50’s Life Insurance?
What are the Pitfalls of Over 50s Life Insurance?
Life insurance policies can be purchased for individuals or couples. With a joint policy, you pay your premiums in exchange for a payout when the first person dies. This can be useful to cover mortgage payments. You can also find policies which offer a payout on the second death, these can be useful for couples planning their inheritance. In both cases, the policy only pays out only once.
What are the Benefits of Joint Life Insurance Policies?
What are the Pitfalls of a Joint Life Insurance Policy?
It is always best to speak to an insurance expert before checking out some life insurance quotes. Get in touch with an advisor if you are interested in level term, decreasing life, single and joint life insurance policies. They can offer you a free, no-obligation quote.
I needed life insurance and critical illness for myself and my wife. I got a number of quotes from some of the big brands and was very happy with the final price. Mike Davidson, Birmingham
* Life insurance from 20p per day is an illustrative figure only and may not be available to you. The figure is based off of a 25 year old non smoking female taking out £150,000 of term assurance over 25 years on a level term basis and available from Beagle Street. Figure accurate as of 19/03/2015.
* Life insurance & Critical Illness from 35p per day is an illustrative figure only and may not be available to you. The figure is based off of a 25 year old non smoking female taking out £150,000 of term assurance over 25 years on a level term basis along with £50,000 of critical illness cover and is available from Beagle Street. Figure accurate as of 19/08/2015.
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