Life Insurance FAQs

Picking the right life insurance can be overwhelming and put to the bottom of your 'to do list'. You might be tempted to skirt around the whole issue as it's something that you just don't want to think about.

But it's important that you're covered and have the right cover. So to make the whole thing less daunting we've put together some commonly asked questions. They should leave you feeling more confident about finding the right policy.


Do I need life insurance?

It's a personal preference, but to decide, you should think about how your family might be taken care of if you were to pass away. You need to consider what would happen if you weren't around anymore. Having life insurance will mean you know they could be taken care of financially.

Do you need a medical exam before getting cover?

Unless you go for a policy that states it has ‘guaranteed acceptance’, you might need a medical examination. This will depend on factors such as your age, health, family history and the level of cover you want.

A medical typically takes the form of a general check-up where a doctor measures your blood pressure, pulse, height and weight. You may also be asked to provide a urine sample to help identify if you are a smoker or a drug user.

How does life insurance work?

By taking out life insurance, you can make sure that a lump sum (or in some cases a regular income) is paid out to your dependents when you die. How they use it may vary – it could, for example, be used to pay off your mortgage or cover other financial obligations so that your family is looked after even when you’re gone. You can also get a policy that pays out should you be diagnosed with a terminal illness.

Are there different types of cover?

There are generally two types of life insurance – term assurance and whole-of-life cover. With term assurance you choose the levels you want to be insured for and the period of time for which you want cover. If you die within the term, the policy pays out to your beneficiaries.

Whole-of-life cover is an ongoing policy that pays out when you die. These policies are more expensive than term assurance policies as they’re guaranteed to pay out at some point.

How much cover do I need?

The amount of cover you should get depends very much on your circumstances. If you have a mortgage, you’ll want a policy to cover the loan amount outstanding. You’ll also need to consider covering other loans you may have so your family is not left with large debts after your death.

Other things to consider with life insurance policies are childcare expenses or university fees.

Experts suggest a cash sum equal to ten times your annual salary.

Is life cover from my employer sufficient?

Some companies offer life insurance which pays out if you die while employed. Otherwise known as death-in-service benefit, it is often free and comes as part of a benefit package.
The amount employee cover pays out will vary – check with your employer – it is generally three or four times your annual salary.

Whether this cover is sufficient will be very much to do with your family circumstances and you’ll need to ask yourself whether this payout would be enough to cover your existing debts, future childcare costs and also replace your income in the long term. If it doesn’t, you could always top up with additional cover.

How do I decide the term of my policy?

The policy length is up to you, but you’ll probably base your decision on two factors – your dependents and your debts. If you have young children, you’ll likely want cover that provides for the period until they’ve left home. In this case, you would buy a policy that lasts until the youngest child can support themselves.

Similarly, you would want your life insurance term to cover the period during which you are paying off your mortgage.

How are policy premiums calculated?

The cost of your premium will be worked out by the sum assured, the length of term, the cover you want and any extra add-ons.

After this, each provider has its own set of criteria which determines how your premiums will be calculated. When you apply, you’ll be asked a series of questions designed to help providers identify the risk they are taking on – i.e. how likely they are to pay out.

The main areas the provider will look at are your age, weight, medical history, occupation, hobbies, smoking and alcohol consumption.

Are premiums guaranteed?

They can be – it all depends on the kind of policy you go for. Opting for cover which has a guaranteed premium means the amount you pay each month will not change over the term of the policy. Taking a policy with this kind of guarantee offers you the peace of mind of knowing exactly what you’ll pay each month for the entire length of the contract.

If you choose a policy with reviewable premiums your provider will review its prices, normally after five or ten years. After this the cost of your insurance will more than likely rise.

How can I reduce my premium?

The cost of premiums depends on who you are and the state of your health. For example, the younger you are when you take out a policy, the cheaper your premium is likely to be.

You’ll also pay less if you’re a non-smoker, so a good way to reduce your premium is to quit smoking – though bear in mind that typically you may need to have been smoke-free for 12 months.

Other lifestyle changes might also help you save money, such as cutting the number of units of alcohol you have per week.

I have a medical condition, how can I proceed?

You should always be honest and straightforward with informing your provider about your medical history and disclose all details on the health questionnaire. This may result in having to pay more for cover if you have a pre-existing medical condition.

However, keeping quiet about your state of health could invalidate your policy. This could potentially mean that your family would not be able to make a successful claim, leaving them without the financial support they need in the event of your death.

I am over 50. Can I still buy life insurance?

If you’re over 50 you may still buy a life insurance policy, although the older you are, the more it is likely to cost. It may make sense to purchase it as early as you can, in order to save you money.

If you’re over 50 years of age, you may need less life insurance anyway, as you might have paid off a lot of your debts already. Some firms offer specialist over 50s life plans which guarantee acceptance without any medical or health questions.

Are there extras I can add to my policy?

Once you’ve decided on your policy and the sum assured, you can opt to add an extra. One of the most common add-ons is critical illness cover. This pays out a lump sum if you’re diagnosed with one of a number of serious medical conditions, like some types of cancer.

Premiums for critical illness are often expensive, but it can be cheaper to add the cover to your life policy than buy it separately.

Another popular policy add-on is waiver of premiums, which allows you to stop paying your life insurance premiums if you can’t work due to illness or injury.

Does my spouse need a separate policy?

If you’re a couple, you could buy two separate policies for you and your partner, or choose to buy just one joint life insurance policy. A joint policy will work out cheaper than two singles, but should your partner die, the joint policy will pay out and the policy will then end. The survivor is therefore left without any life insurance, and they may need to buy another policy – something that could work out more expensive now that they’re older.

Do I have to pay tax on a pay-out?

Life insurance payouts are not subject to income tax, but could be liable for inheritance tax at 40% if your estate is worth more than £325,000. To avoid paying this, you could write the policy into a trust. This ring-fences your pay out from any other asset left in your will, such as your property, meaning the money will not be subject to an inheritance tax deduction during probate (the process dealing with the estate of a deceased person)

Can I make changes to my policy?

Some, but not all, policies let you make changes to provide more or less cover. You’ll need to check this with your provider.

If yours does not allow you to alter your policy, it could be cost-effective to maintain your old policy and take out ‘top-up’ insurance with a new company.

Those that do allow changes may let you increase the sum assured after certain life events, such as moving home or having a child. Your premiums will likely increase, but you may not have to face any new checks on your health.

What are the exclusions?

When it comes to exclusions, there’s no simple answer. All policies vary, so it is vital to read the small print carefully before you decide which works for your needs.

As an overview, things that are normally excluded are deaths due to alcohol or drug abuse, active participation in war or terrorist activities, suicide or deliberate exposure to exceptional danger.

What is sickness insurance?

Sickness insurance pays out a lump sum or a regular income should you become unable to work due to illness. This could then be used to help you to keep meeting loan repayments or essential bills while you’re going through a difficult time.

Are life insurance and life assurance the same?

There are important differences between the two terms.

Life insurance covers you for a specific period of time. If you die within this set period, the insurance company pays the claim, provided premiums are paid. If you survive to the end of the period, the policy ends without a pay-out.

With life assurance the policy will cover you when you die. It is called ‘assurance’ because death is inevitable so the plan will definitely pay out one day, as long as you have paid all the premiums.

How can I protect my family online?

Simple steps you can take include: using strong passwords, installing anti-virus software, learning to recognise phishing attempts, ensuring websites on which you enter personal data have ‘https’ in the address, and establishing parental controls on the internet. Read more, here.

What is death in service cover?

Death in service cover is where a lump sum is paid to your family by your employer if you were to pass away whilst employed by them. The sum paid is often a multiple of your salary but not all employers provide this and the amounts do vary so be sure to check your contract or ask your HR team.

How does family life insurance work?

Family life insurance is taken out to provide for the surviving family members should the main breadwinnder of the family pass away, or to pay for the childcare if the worst were to happen to the main care giver.

Does smoking affect my life insurance premium?

An insurance provider will class you as a smoker if you have used any tobacco products (including nicotine replacement products and e-cigarettes) in the past 12 months. You are likely to pay a higher premium than a non-smoker as a result. Read more, here.

Do I need to prove my medical condition when taking out insurance?

You must answer all medical questions the insurance provider asks to the best of your knowledge or it could invalidate your policy. Some insurance providers ask more than others in regard to your medical history. Others will need a doctor’s report and some may also need a medical to make sure they offer the right cover for you. Read more, here.

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