Life Insurance/Critical illness Cover
What is life insurance?
Life insurance is a policy that pays either a lump sum or a series of smaller sums to your family in the event of your death.
Critical illness policies usually pay a lump sum if you suffer from one of the illnesses or conditions, or have one of the surgical procedures covered by the policy. Critical illness cover is usually available, at an additional cost, when buying life insurance.
Why do I need life insurance?
We may not like to spend time thinking about it, but if you weren’t there to look after your family, who would? Or if you were unable to work because of an illness, would you be able to keep paying your mortgage?
What are the chances of you needing to claim on your life or critical illness cover? These are just a few of the statistics published by the British Heart Foundation and the Imperial Cancer Research Fund. These facts are not included to be overly morbid, they are simply here to help you make an informed decision about how you can protect yourself and your family.
- Heart and circulatory disease is the UK’s biggest killer. Someone has a heart attack every 2 minutes.
- About 270,000 people in the UK suffer a heart attack each year, about half of which are fatal.
- 1 in 3 people will suffer from cancer at some point in their lives, with a third of these succumbing to the disease before the age of 65.
- Over 1 in 4 (27%) of deaths are caused by cancer.
- 1 in 9 women will develop breast cancer at some point in their lives. 62% survive for 5 years or more.
- See our 'Life insurance facts' page for more info.
What types of life insurance policies are there?
- Term Insurance
The insurer guarantees to pay the policy benefits if you die within the chosen term. If you survive to the end of the term, then no benefit will be paid. If you stop paying premiums during the term, the policy lapses and has no value. Term insurance can be taken out on a single life or on joint lives – usually the policy is designed to pay out on the first death.
- Level Term Insurance
The lump sum payable on death remains the same throughout the mortgage term. This is usually used for family protection, or to cover an interest only mortgage where the mortgage debt does not reduce throughout the term.
- Decreasing Term Insurance
The lump sum decreases over the term of the policy. These policies are commonly used to protect a repayment mortgage, where the outstanding balance decreases each year.
- Tax Efficient Insurance
This is a new product, which means the higher rate of tax you pay, the more money you save on your monthly premiums. We can help you work out if you are eligible for this product. Following a change in legislation, Tax Efficient Life Insurance plans are not currently available.
- Waiver of Premium
This option is often available at an extra cost, and means that the insurance company will pay your premiums for you if you are unable to work for health reasons. Then you will still be able to benefit from the scheme, even if you are unable to pay for the monthly premiums.
- Terminal Illness Cover
Some life insurance policies will also include terminal illness cover, which means that if you are diagnosed with no chance of recovery, the insurers will pay out early.
Critical Illness Cover
- Critical illness with life insurance
If you add critical illness cover to your life insurance, you will usually receive your life insurance payment once a critical illness is diagnosed, rather than on death. If you make a full recovery, you get to keep the payment. However, if you subsequently died, you would not receive an additional life insurance payment.
- Standalone critical illness cover
These policies will still provide a lump sum or a regular income on the diagnosis of their definition of a “critical illness” but as it is a standalone product, your life insurance product would not be affected. Therefore if you died at a later date, your family would receive a further lump sum.
- Guaranteed/reviewable premiums
Most term policies have guaranteed premiums, which means that the monthly cost is fixed throughout the term. An alternative is to have reviewable premiums, which means your payments can get more expensive over time, although they may start off lower than a guaranteed term payment.
What life insurance policy can I afford?
Click here to obtain a quote to find out what your monthly life insurance costs would be.
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