Your Questions: What kind of

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which type of life insurance is best for me

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Your Questions: What kind of<br>LIFE INSURANCE do I need?

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What type of Life Insurance do I need?

There are many different options when it comes to life insurance and this can make choosing a policy daunting. However, there are several questions you can ask yourself to make this task easier. We have listed the most important questions you can ask yourself below.

How long do I want Life Insurance for?

Some policies will cover a specific period of time, 25 years for example, while others will cover you until you pass away. Therefore, one of the first questions to ask yourself is — how long do you want to cover for?

Until I pay off my mortgage or until my children grow up

If you want life insurance for just a specific amount of time — to pay off your debt, to pay off your mortgage, or until your children grow up — then term insurance is the life insurance cover for you. Term insurance will cover you within the term agreed only. If you pass away within the term then your loved ones will receive a pay-out. If you live beyond the end of the term then the policy will simply come to an end.

There are three main types of plans for term insurance:

Renewable– This plan allows you to renew your term insurance policy when it expires. This is useful as you will not need to go through another health check. Be aware that the money you pay (also known as premiums) can change.

Reviewable– With reviewable policies, your plan will be fixed for a set period. After this period ends your insurance company can review it and your changed circumstances. The premiums may be changed.

Convertible – Convertible life insurance is where you start out on term insurance but with the option of switching to whole-of-life insurance later on down the line if your circumstances change.

My whole life

If you want your life insurance plan to extend until you die, then whole-of-life insurance is the best cover for you. This type of permanent life insurance is more expensive than any other kind as your loved ones will definitely get some sort of pay-out when you pass away.

What pay-out do you want your loved ones to get?

There are a number of different levels of cover for you to pick from on how much money your loved ones will receive. This will affect the money you pay throughout the policy. So another question to ask yourself is — what life insurance should I get and what kind of pay-out do you want your family to receive after you die?

A sum that shrinks as my debt is paid off

If you want the pay-out and the premiums you pay into your policy to decrease as you advance into the term, then decreasing term life insurance is the policy to go for. Many people choose this plan to sync with the repayments on their mortgage or any other debt.

A sum that grows alongside the cost of living

Some people choose to have their pay-out and premiums rise as the term advances and this is called increasing term life insurance. This is so the pay-out will maintain its value later on down the line, despite inflation.

A fixed sum

You might want your loved ones to have security and know exactly the amount of pay-out they will receive. This is where level term life insurance is the most appropriate option. The amount will stay the same throughout the years and payout the sum agreed if you pass away during the policy term.

Other pay-out factors to think about

Many people choose to have their loved ones receive the pay-out after they die as a lump sum. However, there are other ways for the money to be received:

As quickly as possible in a trust

If your pay-out is liable for inheritance tax, you might want to put your life insurance policy in trust. This will increase the chances that your family will receive your pay-out quickly and sidestep the tax.

As a regular monthly income

With regular life insurance, your family will receive a single lump sum when you pass away during the insurance term, and they may spend it as they wish.

Family income benefits will let them receive the money as a regular monthly income. This will come to them from the date of the claim to the end of the term. The pay-out and the premiums for this plan are usually lower than other types of life insurance.

Do you have personal circumstances that will affect your life insurance?

One of the most important questions to ask yourself is — do I have any personal circumstances that will affect my life insurance plan? If one of these factors apply to you then it’s worth taking a further look at the effect this will have on your life insurance.

I am over 50

It is best to look into life insurance early on as the older you get, the more expensive the premiums are. However, if you are between 50 and 80, there are insurance plans tailored just for you. This is called over 50s life insurance and it is built to be more affordable to people looking for life insurance later on in life.

An attractive aspect of these policies is that anyone will be accepted. Therefore, there is no need to worry about passing medical or lifestyle checks.

As with whole-of-life cover, the payout is guaranteed – though this of course depends on whether you keep up with your payments. If you miss one you will no longer be covered and will receive no death benefit from the money you put in previously. You also need to survive at least one year (in some cases two years) into the term.

I have a critical illness

Life insurance pays money out to your family in the event of your death but you can also add an extra to this called critical illness cover. This is a lump sum that will be paid out if you are diagnosed with a disability or serious medical condition during the insured period. There are two main types of critical illness cover you can take out:

Additional critical illness cover – This policy will pay out if you are diagnosed with a critical illness or disability and when you die during the insured period.

Combined critical illness cover – This policy will only pay out once. If you become critically ill during the period you will get a payout but then you will not be covered if you die during the term.

I have a terminal illness

If you have a terminal illness then you may not have to buy a separate policy as with the critical illness cover. Terminal illness cover is often included in basic life insurance policies. Critical illness refers to a specific illness from which you might recover whereas terminal illness is when you are diagnosed to pass away within 12 months. If you are diagnosed then many standard life insurance policies will pay out the money before you pass away.

I want to take joint life insurance with my partner

If you are married, in a civil partnership, or in a long-term relationship, you may decide to take out joint life insurance. Like many life insurance policies, the money will go out in a lump sum. However, there are some fundamental differences with this type of insurance.

There are two main types:

The first death policy – This policy will pay a lump sum when one of the partners dies during the term. After this, the cover comes to an end – the second person will not have a cover and as they are now older, may find it harder to buy life insurance.

The second death policy– This policy, on the other hand, will pay out when you both die. Unlike the first option, this will usually be a whole-of-life policy as there is certain to be a pay-out at the end. This means this is more expensive than the first death policy.

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