Life Insurance Explained

What is life insurance?

Life insurance is sometimes referred to as life cover or life assurance and is a way to provide financial stability to your loved ones if you were to pass away. Taking out life insurance is one of the most selfless things you can do to financially protect your family.

Put simply; life insurance pays out an agreed sum of money if you were to die while covered by the policy. In return for this insurance, you will make regular (monthly or annual), agreed, payments for the duration of your cover.

The money that is paid out from your life insurance policy can help to minimise the financial impact that your death would have on your family. Everyday items such as household bills, childcare costs and rent or mortgage payments can be covered. You can also factor in other items such as holidays, university fees or a deposit on a home.

Life Insurance Explained

How much cover do I need?

You can choose exactly ho much cover you want to take out and how long you need it for. How much cover you may need can be a tricky question, to help answer this please take a look at our life insurance calculator. The length of your policy is likely to depend on your circumstances and purpose for your insurance policy. Most people would look to take out cover until their children are adults or until their mortgage is repaid.

How much does life insurance cost?

Generally, the higher the amount of protection you need, the more the policy premiums will cost you. Other factors that can affect how much life insurance will cost you are your age, lifestyle and medical history. See our article on how much does life insurance cost for more details.

Why do I need life insurance?

Before taking out life insurance it is important to understand why you want to be covered. It is likely that a change of circumstances such as buying a new house or having a child has made you think about life insurance for the first time, or it could be that it is something you have been meaning to arrange but haven’t yet quite got around to doing it.

Once you have worked out how much cover you would like and how long you would like your policy to last it is time to compare life insurance quotes to get the best deal in terms price and suitability to your individual requirements. It is likely that you will have to answer questions about your medical history (see Why do you need to know my medical history) as well as questions around your lifestyle including work and hobbies.

Putting your policy into trust

Once you have your life insurance policy in place it is important to consider putting the policy into trust. Doing so means that your life insurance payout is not included in your estate and you can be sure the beneficiaries receive the money you intended for them. A trust also has tax benefits in that the beneficiary or beneficiaries will not have to pay inheritance tax.

We have a whole area dedicated to information on trusts if you would like to find out more.

Trust planning is not regulated by the Financial Conduct Authority. Inheritance tax planning is not regulated by the Financial Conduct Authority.

Protection plans with no investment link will have no cash in value at any time and will cease at the end of the term. If premiums are not maintained the cover will lapse.

Can’t find what you’re looking for?

If you still have questions or would like to speak with an adviser please get in touch.

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