When you’re getting started with life insurance for the first time it can be an overwhelming experience. Even the terminology being used can send your head spinning. At Choozi we believe that the process shouldn’t be stressful. That’s why we try to make it as easy as possible for you to search among some of the leading UK providers.
In this article, we’ll go through some of the most common types of life insurance that are available. We’ll also provide a clear definition of some of that pesky terminology. By the end of this article, hopefully, you’ll be able to get a life insurance policy that you know is right for you.
Where should you start?
At times it can feel like a lot to take on. There’s a lot of talking about death and it can be tough to face at the best of times. It is important to start thinking about it though. So, when you’re getting started there are a few key terms that you should aim to be familiar with.
Benefit Amount or Covered Amount: This term refers to the amount of money that will be paid by the insurance company if the person who is insured passes away. When you see this phrase, think pay-out or the amount of money you are insured for.
Term: A Term is another way of saying time period. So, if you see it written somewhere that the insured term will be X years, then you know that’s the time period for how long the policy lasts for.
Life insurance, mortgage life insurance and critical illness will all cover you for a pre-decided term. Over 50s life insurance, on the other hand, is a whole of life policy meaning it will last your entire life, paying out a lump sum to your loved ones when you die.
Monthly Premium: Probably just as important as Benefit Amount. The monthly premium is the amount of money you will pay each month in order to maintain your cover. There are plenty of rules around the payment of premiums, so it is important to understand that amount fully.
These terms are something you will see repeated and again no matter what type of policy you look at buying. Now that we have those established, we can look at some of the popular types of life insurance.
Term Life Insurance
We’re willing to bet that if you’ve looked at life insurance before, you’ve encountered a term life policy. The way in which a term life policy works is straightforward. At the beginning of the policy, you select your term and your benefit amount. So, for example, this could be 30 years for the term and the benefit amount could be £200,000. The insurance company will then give you a monthly premium that you must pay to maintain that cover during the selected term.
From there you are all set. If you pay your monthly premiums you will be covered for that amount for the duration of the policy. Term Life Insurance policies are generally fixed which means that there will be no increase or decrease in your policy premiums or benefit during the entirety of the policy unless you apply to do so.
This could be a viable option for people who have tighter budgets or if you need to know exactly what you will be paying long term.
Mortgage Life Insurance
Mortgage life insurance is like term life insurance only the benefit amount will decrease over time. One of the principal reasons people tend to get life insurance is to protect their financial investments e.g. a mortgage. It makes sense that you would want to provide for your family or make sure that they can live in the family home.
You may have seen decreasing term life insurance explained in a similar way. This is similar but mortgage life insurance usually does not pay a benefit if you can’t work or fall ill. With decreasing life insurance, you may be able to get critical illness cover as well.
Over 50s Life Insurance
If you’re aged 50-80 and a UK resident then Over 50s Life Insurance could be a great option for you. This type of life insurance offers what’s known as guaranteed acceptance. What this essentially means is that no matter what your personal health circumstances you will be accepted by the insurance company. The only criteria that you would have to meet would be that you are within that age bracket and a UK resident.
People often seek out this kind of life insurance post-retirement. This is a time when the mortgage could be pretty much paid off. It is also a time that people may start to think about passing away. Over 50s life insurance could offer a way of helping to pay for things like funeral costs, debts or even passing a gift on to loved ones.
Life & Critical Illness Cover
Critical illness cover offers you a way of protecting your family should you be unable to work as a result of falling critically ill. Suffering from a critical illness can bring a huge amount of uncertainty. The last thing you and your loved ones want to be dealing with is your finances.
Choosing critical illness cover is optional so it’s important to consider how it would work for you. With life and critical illness, it pays out on the first event. What this means is that if you are diagnosed with a disease on the insurer’s list of critical illnesses the policy will pay out the full amount of your critical illness benefit. Once this has happened you are no longer covered for life insurance. The critical illnesses covered by each policy can vary so it’s important to check the policy details.
Critical illness cover can help to provide a financial cushion for your loved ones should tragedy strike. This type of cover is often used to pay for things like rehabilitation costs, lost income or even a recuperative holiday.
What are the other types of Life Insurance?
While these are some of the most common types of life insurance, they are by no means all of them. The reason why these ones feature so heavily is that they are sometimes seen as the most affordable.
One that you may have heard of is Whole of Life Insurance. This is where no matter what, as long as your premium is paid you will receive a benefit amount upon your death. It sounds pretty great, right? However, one of the downsides of this type of insurance is that it can be expensive. The main reason for this being that it could be seen as being a higher risk for the life insurance company. They will have to pay out money regardless of what happens.
Which type of Life Insurance is best?
It would be great to have an easy answer to this. Hopefully, by reading through these definitions you can decide what seems best for you. There are plenty of reasons for getting life insurance and everyone’s situation is different. The most important thing is to start thinking about it now. While it can seem intimidating sometimes grabbing the bull by the horns can be the best way to go about it.
One thing that you can be sure of is that we will help find the right policy for you. All we need from you are a couple of details and then we can search among some of the leading providers in the UK. We are 100% impartial, we only want to connect you with the best policy for you.