It’s so simple to get your life insurance sorted.
None of us know what’s really around the corner. The unexpected can happen at any time in your life, and you want to know that your family and loved ones will be financially secure after you’re gone.
With the correct life insurance in place, you and your family will have the peace of mind that if the time comes, your financial worries will have already been taken care of.
We make it so simple to sort out this valuable protection. We find the most competitive quotes quickly and easily, and our friendly team of expert advisors support you.
How does life insurance work?
Life insurance is a safety net that pays out a tax-free sum to your family, giving them financial support after you pass away. Whether a spouse or children depend on the money you earn, life insurance protects their financial support when you’re no longer around.
The cost of life insurance depends on several different things, including:
Age: Older individuals pay higher premiums because they’re more at risk of developing certain illnesses.
Health: You might have to pay more each month if you have a pre-existing health condition. However, this depends on the situation and its severity.
Lifestyle: Your insurance provider might also have higher premiums for people who drink a lot of alcohol, smoke or are overweight.
Occupation: If you work in a dangerous job like being a firefighter, you’ll pay more than someone in a relatively risk-free profession.
Family Medical History: Certain conditions, like some types of cancer, can run in families, and your insurance provider will want to learn about them.
Cover amount and length: Policies with higher cover amounts and longer terms always cost more than other policies because your family receives more financial protection.
It’s important to be honest about your medical status and family history, as the insurer might not release any payments if you miss out on any pre-existing conditions.
Luckily – as long as you’re honest – claiming on life insurance is simple. Your partner or family just need to contact the insurance company, so you must ensure your documents are kept in a safe place.
The types of life insurance
When you decide to take out a life insurance policy, there are numerous factors to consider, including the type of life cover you need. There are three different life insurance policies in the UK, each with unique benefits.
As the most basic life insurance policy, term assurance is easily organised and customisable. When you take out one of these policies, you can decide how much life insurance you want to take out and the cover duration.
However, while these policies are easy to arrange, they have some limits. For example, if you pass away during the cover period, your beneficiaries will receive an outright payment known as death benefit.
If you pass away outside of your life insurance cover term, nobody will receive any money, and the company won’t refund your premiums.
There are three types of term assurance, level, decreasing and increasing.
Level term assurance
Level-term life insurance means your beneficiaries will receive the same payment for the duration of your coverage. For example, if you take out cover for £150,000 and pass away within the cover period, your beneficiaries will receive that amount.
Decreasing term insurance
Decreasing life insurance is where the death benefit drops over time. People often choose this option when they need to cover specific financial obligations such as loan repayments or mortgages. The payment amount makes it easier for the next of kin to manage repayments.
Increasing term insurance
In contrast, increasing term insurance payments get larger as the policy continues. So, for example, if the individual dies when their policy has been active for a while, their beneficiaries will receive a larger death benefit. These policies can protect your loved ones against inflation and rising living costs.
Family income policies
Family Income Benefit differs from traditional policies because they don’t pay a lump sum. Instead, your family receives a regular income over a set period. For example, you could invest in a policy that lasts 20 years and pays a certain monthly amount.
The main reason for these policies is to provide income protection for your loved ones. They can use these payments to cover the mortgage and bills, giving them financial stability.
While this insurance type has many benefits, there’s no initial lump sum payout, and the duration only lasts for a set time.
Whole-of-life insurance policies
If you want to give your loved ones maximum protection, a whole-of-life policy doesn’t come with any fixed terms and pays out whenever you pass away. These policies are popular because they offer long-term protection and guarantee that your payments will eventually pass on to your beneficiaries.
As there are no fixed terms, the policies are more expensive than traditional term assurance, but a whole-of-life policy does offer more security.
There are two main types of whole-of-life insurance, balanced and maximum cover.
Balanced cover allows people to pay the same amount throughout life, even when they become unwell or get older. Some premium payments increase as a person ages or in personal circumstances, but these policies offer long-term security.
Maximum cover is a unique form of life insurance because your cover links with an investment fund. Your chosen insurer will invest your monthly payments to make enough money to cover the payout when you pass away.
However, the main problem with maximum cover is it depends on whether the investments are successful. Insurers might increase your monthly premiums or offer a lower payout to your beneficiaries, so these policies have less security.
Single vs Joint life insurance
One of the most significant decisions a couple will have to make is whether they opt for single or joint life cover. To decide which is best for you, it’s essential to understand what each policy offers:
Coverage Level: While single life cover is for one person only, joint policies cover two people.
Insurance Payouts: Single life insurance pays when an individual passes away, so if a couple each has a single life insurance policy, the beneficiaries will receive two payments. Joint policies pay out when one person dies and the surviving partner has no coverage.
Costs: Single life insurance is more expensive than joint coverage because it covers individuals. However, joint life insurance is cheaper because the policy ends after the first person passes away.
There’s no right or wrong answer as to which policy is better, but some people prefer single coverage as it means they can file two separate life insurance claims when needed.
The benefits of investing in a life insurance policy
As with all insurance policies, life insurance is an investment. However, it also offers numerous benefits and can provide your loved one with a much-needed financial safety net. Nobody knows what’s around the corner, and taking out coverage can give you peace of mind.
Financial security for your loved ones
Life insurance gives your loved ones support when they need it most. Losing a partner or parent is hard enough, but financial difficulties can also take their toll.
When you opt for a particular cover amount, you can be sure that your family will have enough money to cover immediate expenses, maintain their standard of living and remain in the same home.
Debt and expense coverage
Along with your mortgage, life insurance covers car loans, credit card debts and other essential expenses, offering financial protection. However, it can also help your loved ones pay for any end-of-life costs, funeral arrangements and medical bills from private treatments.
Many families are now two-income households, and life insurance can be a crucial income replacement tool. By giving your loved ones more security, you can ensure they have money to pay for daily expenses, private tuition and anything else.
Cash value accumulation
Some types of life insurance, such as whole life or universal life, include a cash value component that accumulates over time. You can sometimes access this cash value through policy loans or withdrawals for various financial needs, such as education or emergencies.
Peace of mind
Many people worry about what will happen to their children and spouse when they pass away, but life insurance can give you peace of mind. It offers reassurance that your loved ones will have financial stability.
Flexible policy options
The great thing about life insurance in the UK is there are numerous policies to choose between. Whether you want a cash sum paid out immediately or to give your family set monthly payments, there’s a policy that will suit your budget and needs.
Coverage for critical illnesses and disabilities
Some insurance companies also let you add critical illness cover to the life insurance policy, which can offer financial support if you become unwell.
If you get a severe or terminal illness, the policy will cover important costs and you’ll receive the money, while your loved ones receive life insurance payouts should you pass away.
What can a life insurance lump sum be used for?
Life insurance can be used for several different things, including:
Mortgage Payments: Including a repayment mortgage or interest-only mortgage.
Living Costs: General expenses such as groceries, clothing, schooling, etc.
Debt Repayments: Credit cards, personal loans, medical bills etc.
Funeral Expenses: Life insurance can pay for your funeral, making it easier for your loved ones to arrange.
What to consider when choosing life cover
Choosing the right life insurance policy is a crucial financial decision that requires careful consideration. Jumping into the process could result in you not getting the right coverage or choosing a policy that doesn’t suit your needs.
Here are important factors to keep in mind when selecting a life insurance policy:
What’s the purpose of obtaining life insurance? Do you want to make sure your spouse has enough money to pay the mortgage? Or is the insurance to help your children pay for medical bills and your funeral? These are significant decisions as they’ll define how much insurance you receive.
The coverage duration will impact how much you pay each month, so consider what you need before deciding. For example, you might want the policy to last until your children achieve financial independence or the mortgage is paid off in full.
In an ideal world, we’d have policies that provide lifelong protection for our loved ones, but that’s not always possible. Your insurance should align with your budget, as failing to make payments could mean you have to decrease the coverage or lose the premiums you’ve already contributed.
It might seem tempting to lie about pre-existing health conditions, but your family could lose out if your insurance provider feels you weren’t honest during your initial application. Be prepared to discuss your medical history and have an assessment if needed.
Get proper advice
Before choosing a policy, it’s a good idea to speak to a financial advisor, as they’ll be able to talk you through the premium structure and any extra payments you might be unaware of. A free consultation can also help you find the best life insurance provider.
How much cover should I have?
The amount of cover we arrange is essential, and we’ll help ensure it’s right. Our expert advisors will help you consider everything necessary, and we’ll work together to recommend a bespoke plan to suit your needs.
Why Use Believe Money?
Believe Money is an award-winning finance broker dedicated to offering the best range of affordable loan options. Whatever your circumstances or credit rating, we’re committed to getting you the best secured loan interest rates by searching our entire panel of secured loan providers.
Whatever you need a secured loan for, we’re here to help. Our specialist advisors are available Monday to Friday, so if you need any help please contact us online or give us a call on 01302 591 360.
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