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What is Life Cover?

QUICK INTRO – Life cover is a simple and affordable insurance policy that provides your family with financial protection if you die.

It pays out a *tax-free lump sum to your loved ones if you die or it can pay out as an income (family income benefit) on death.

In this quick guide, we look at what life cover is and what it does to protect your family if anything happens to you. We’ll also answer some of the most common questions about life cover and help to bust some of the main myths about

Premiums for life cover start from as little as £3 per month and you can take different types of policies to fit your needs or circumstances. The average cost of life cover is around £35 per month for around £150,000 of cover according to recent research.

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Here are some of the common myths around life cover and the main reasons why consumers are put off applying.

1) Life cover won’t pay out

On average around 98% of all life cover claims are paid out in the UK and it is actually very rare that claims are not paid. Some of the main reasons for a claim not being paid out are:

  • Not disclosing a pre-existing medical condition on your application
  • Fraudulent claims
  • Terminal illness claims that don’t fit terms and conditions

Other than these few reasons above which represent a very small percentage of life cover claims, almost all claims are paid.

2) Life cover is too expensive

A recent study showed that life cover is actually far cheaper than many consumers thought and the reality was that premiums were almost 4 times lower than people perceived them to be.

Example:

APPLICANT AGE:30yrs
SUM ASSURED:£150,000 (amount of cover)
POLICY TERM:25yrs (length of cover)
TYPE OF COVER:Mortgage Life Cover (Decreasing term)
SMOKER:NO
PREMIUM:£5.25 per month

*Premiums quoted above were based on a person with no pre-existing medical conditions and were produced on 02/08/2023.

Lots of families were actually put off applying for life cover because they assumed that it would be too expensive, especially applicants with pre-existing medical conditions. Premiums for life cover start from as little as £3 per month and can pay out thousands of times more than what you have paid in.

3) You can’t cancel life cover

Wrong… life cover is a monthly renewable insurance policy that can be cancelled at any point with NO PENALTY. Many people believe that life cover can’t be cancelled which is incorrect and you won’t get a penalty if you do cancel your policy.

There are some life cover companies that might suggest that you can’t cancel your policy in the first 4 years, or will charge a fee for cancellation. This is a bad practice and you should definitely avoid any companies using these tactics with their customers.

4) Life cover is mandatory for a mortgage

It is still a question that people ask when applying for a new mortgage or a re-mortgage, and it’s a very valid question. Historically you might have been required to have life cover as a stipulation for a mortgage offer, but this hasn’t been the case for many years.

It is strongly recommended that people should have life cover to protect their mortgage and especially for people with children or other dependents, but not a requirement.

5) Life cover premiums are higher for people with pre existing medical conditions

It is true that life cover premiums are based on your health and medical history because cover is assessed based on risk. Applications for life cover are medically underwritten which means that you will be asked to complete a medical questionnaire and potentially provide medical reports from your GP.

In reality, if your medical condition is mild or moderate then your premiums should be far more reasonable. Some more severe medical conditions (e.g. Heart Attack, Stroke, or Cancer) might result in higher premiums, depending on severity and diagnosis.

You can get advice from a pre existing conditions life cover expert which could save you money and time.

6) Life cover applications require a medical

As we mentioned above, it is only really people who have a pre existing medical condition who are most likely to need a medical or GP report. Around 80% of all life cover applications don’t require any medical evidence at all and are accepted at point of sale.

It is also important to remember that a medical or GP report provides you with a guarantee that your life cover policy will pay out if you die. This is because the insurer has the information that they need upfront and there is no question around your health when you apply.

In this section we look at how life cover works and what it can do to protect your family if the worst should happen. We’ll also answer some of your most common questions about life cover and explain what you should be looking for ideally.

Different types of life cover:

Click above to find out more information about each of the different types of life cover. Or you can contact one of our specialists for free expert advice on which policy is best to protect you and your family.

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Here are some key points you should know when thinking about life cover:

Life insurance is one of the most popular and most common forms of financial protection in the United Kingdom, yet many families are unprotected or don’t have enough cover.

Aviva PLC is the largest life insurance provider in the UK currently following its recent acquisition of Friends Life in 2015. The multinational general insurance provider has approximately 33 million customers spreading over the 16 countries that it operates in.

Life cover pays out a cash lump sum to your family and loved ones if you die during the term of your cover. Benefits can be used to pay off your mortgage and to provide your family with money to live off after your death.

It is estimated that only 30-35% of people in the UK has life cover and this is despite the fact that 60% of households suggesting that it is important. Many people still feel that life cover is too expensive and unaffordable for them, even though premiums are significantly lower than they believed them to be.

Life insurance premiums start from as little as £3 per month with some insurers, however the average premium is suggested to be around £38 per month. The average amount of cover for each policy is just over £152,000.

Recent research published by the consumer website Which? suggests that only 30% of parents has life cover. This number seems extremely low considering that most parents feel that it is important to have some life cover in place.

Reasons for taking life cover:

  • 46,300 children under 18 loses a parent every year
  • 4.3% of children between 0 and 17 years of age have lost at least one parent
  • UK average household savings is £2,431
  • 42% of adults would survive 1 month on savings
  • Life insurance pays out 98% of claims
  • 54% of adults don’t pay in to a pension currently

There are many compelling statistics that suggest we should all have life cover to protect our family. Ultimately, the choice is yours and it’s down to your individual attitude towards risk to determine whether or not you want to have life cover.

Legal & General’s Deadline to the Breadline 2022 study:

  • 1 in 3 would rely on savings, employment benefits or cut back on outgoings tha insure
  • 67% of adults would prefer to save than insure against an unforeseen event

What does Martin Lewis say about life cover?

Many of us look to financial experts like Martin Lewis when we’re considering important financial decisions. Martin Lewis is a financial journalist providing free financial guidance to UK households, including his own perspective on life cover.

One of the key opinions here is that Martin Lewis believes in life cover from his own personal experience of losing a parent at a very young age. Martin Lewis life cover guidance suggests a number of simple key points, such as his Ten Times rule.

Martin Lewis life cover advice also suggests that people should be able to afford their premiums and not over commit. He also talks about how to make life cover tax efficient with a Trust which can be set up for free by your broker.

The best thing about life cover is that it’s incredibly flexible so you can tailor your cover to suit your needs and budget.

AMOUNTS OF LIFE COVER

Minimum Cover£1,000

Maximum Cover£5 million to £10 million (depending on insurance provider)

Average life cover£152,000

Life cover can be used for a wide range of purposes from funeral expenses to inheritance tax liability or estate planning. Most life cover policies are taken out to protect a mortgage or for family protection.

You might also want to consider life cover for separate purposes which can be mortgage life cover (decreasing life cover) and family life cover (level life cover). These policies can be taken separately by the same person or couple to provide protection for each eventuality.

As mentioned earlier in this section, Martin Lewis life cover guidance suggests a multiple of 10 x annual income. This might not work for everyone but can be a great place to start from to give you an idea of cost and affordability.

Life cover can be used for a range of different purposes to protect your loved ones and your home if you die. The reality of passing away can be a distressing thought for many and most parents would certainly want to ensure that their children were financially protected if they were no longer able to provide for them.

The TOP 10 most common reasons for life cover:

1) Mortgage protection (pay off your mortgage on death)

2) Family protection (provide cover for your partner, children or parents)

3) Pay off debts

4) Cost of living expenses (e.g. bills, credit commitments, clothing etc.)

5) Funeral expenses

6) School fees (pay for private education or university fees)

7) Inheritance tax planning

8) Leave a legacy

9) Medical expenses

10) Care home funding

It’s totally down to your own individual needs or circumstances that will determine your reasons for life cover. Your cover will also be determined by your budget and affordability as not everyone can afford the cover that they need.

Life cover can be confusing simply because of the amount of companies and people offering quotes either online or on the phone. You might have already had experience in getting a quote for life cover, or this might be something that is completely new to you.

Getting the best life cover quote can also vary depending on what type of cover you are looking for and your circumstances.

Here’s just a few of the ways to get your life cover quotes:

Online Life Cover

We’ve got our very own online discount life cover portal that allows you to select your desired cover and enter your personal details at your own convenience. Our online life cover portal will then search the UK’s top insurance providers to find you the cheapest quotes and a fully underwritten price.

Life Cover Advice

Our team of life cover experts are available to talk to you about your protection needs for your family. We’ll then explain how it works and what your options are, before we search for the lowest prices from our extensive panel of insurance partners.

NOTE – we offer FREE life cover advice as well as discounted premiums.

Useful resources

Finder.com – Life insurance statistics

Statista – Life insurance industry in the United Kingdom (UK)

iam|INSURED – Frequently asked life insurance questions

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Is it worth paying for life insurance?

Yes, if you’ve got children or financial dependents then you should have life insurance to protect them if you die. Martin Lewis and the Financial Conduct Authority recommend that you take out life insurance to protect your family and your home. Generally, life insurance premiums start from as little as £5 per month and will be cheaper for younger adults.

Common myths about life insurance:

  • Life insurance won’t pay out (pays out 98% of claims)
  • People with medical conditions can’t have life insurance
  • Life insurance is expensive
  • Savings can be just as effective as life insurance
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Is life insurance worth it? - iam|INSURED

What is the average cost of life insurance per month?

Based on recent research carried out, the average cost of life insurance is approximately £38 per month and the average level of cover is £152,000. Life insurance premiums also vary dramatically from one insurance provider to another and you can reduce your monthly premiums by shopping around.

Fundamentally, life insurance premiums vary depending on your age, health and the amount of cover that you need, starting from as little as £5 per month. You can also get life insurance to protect your family and your home against financial loss if you die.

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Average cost of life insurance - iam|INSURED

What does life insurance cover you for?

Life insurance is a monthly renewable ‘term insurance’ contract that pays out a cash lump sum or regular payments on death to your family or beneficiaries. Policies are most commonly used for family protection or mortgage protection for your loved ones if you die and your household income reduces, plus the additional issues of losing a parent or carer.

Traditional life insurance will not exclude any pre-existing medical conditions and will cover suicide after 12 or 24 months. You can also use life insurance for business protection purposes as well as tax-efficient business life insurance for directors or key people.

What are the disadvantages of life insurance?

The biggest and most common problem that consumers have with life insurance is the cost and the monthly premiums. This is the top reason for policy cancellations and why more people don’t take out life insurance to protect their family.

Another key disadvantage with life insurance is that it holds no investment value, nor can you cash it in. Life insurance works like any other traditional general insurance policy (e.g. car insurance, house insurance, pet insurance etc.), you pay a monthly premium and it will pay out in the event of a claim. Some people decide to use savings instead of taking out life insurance but you need to make sure that you have sufficient savings to cover the costs of death for your family.

Why do I need life insurance?

The fact is that nobody actually ‘needs’ life insurance, but it is strongly recommended that families and couples have cover to protect their loved ones in the event of death. Martin Lewis recommends life insurance and says “this is something that every parent, partner, or person with any other type of dependent needs to consider”.

Life insurance financially protects your loved ones if you die and pays out a cash lump sum to repay your mortgage, pay for school fees, replace lost income, and pay for regular outgoings. Mortgage life insurance is not linked to your mortgage debt so you can use it to pay off some or all of your mortgage.

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Our Mission

At iaminsured.co.uk, we believe in much more than just insurance policies; we believe that everyone is unique and should be treated with the fairness that they deserve. We also believe in providing the very best financial protection, and giving you peace of mind to continue with your busy life without the stress or worry of what might happen.

We are dedicated to providing the best outcomes that we can and access to the best insurance solutions in the way that our customers want or need. We understand that everyone is totally unique in how they want things done and their own individual circumstances, which is where our totally unique approach to financial protection is driven from.

  • 100% online protection solutions
  • Top rated advice from the UK’s leading experts
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  • Dedicated to providing the best protection products for all your needs

With nearly three decades of expertise and established with a commitment to excellence in everything that we do. We have been a trusted partner for thousands of families, individuals and businesses, all with one common goal of looking for the best protection solutions.

Our Mission: To provide easy access to fair pricing, affordable protection and the very best financial security to families and individuals. We are dedicated to offering comprehensive insurance solutions that safeguard the well-being of our policyholders. Guided by integrity, transparency, and a commitment to excellence, we strive to empower consumers and families to face the future with confidence. Our mission is not just about policies; it's about protecting dreams, ensuring legacies, and being a trusted partner on life's journey.

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