Life Insurance

Do I Need Life Insurance?

Not everyone needs Life Insurance. If you don’t have any dependents or liabilities (e.g. a mortgage) that you’d want taken care of if you were to die, then Life Insurance possibly isn’t for you. Moreover, Life Insurance isn’t compulsory, not even if you have a mortgage.

However, many clients with families and mortgages look to Life Insurance to provide valuable protection to their loved ones should the worst happen.

Two of the most common uses of Life Insurance include covering the outstanding mortgage balance, allowing your loved ones to stay in the family home should you pass away. Alternatively, you may use your Life Insurance to provide financial security for your family after your death.

A combination of the two is of course also possible depending on your needs – discuss with your adviser regarding the appropriate level of Life Insurance for your circumstances.

What’s the Risk of Passing Away?

We’ve used our Life Expectancy Calculator to work out the risk of a healthy male of three different ages passing away over the next 10 years:

How Does Life Insurance Work?

Life Insurance is a protection policy designed to pay out a cash lump sum to alleviate financial difficulties your loved ones might face after your death.

This payout can be used for anything, from repaying the outstanding mortgage to generally maintaining their lifestyle.

There are a number of different options to consider with Life Insurance which will have an impact on both what the policy covers and how much it costs.

Level or Decreasing Life Assurance?

Level and Decreasing Life Insurance are the two main types of Term Life Insurance. This means the policies last for a set term, covering you if you die within that period of time, and then end.

Level Life Insurance

Level Life Insurance is the simplest of these life products.

You choose a level of cover (e.g. £100,000) and a length of cover (e.g. 25 years) and should you pass away at any point during those 25 years the policy would pay out that chosen benefit to your loved ones.

Level term life cover is most commonly used to protect an interest-only mortgage or provide a level of family protection.

With an interest-only mortgage, where you are not repaying the capital the outstanding debt remains the same over the life of the mortgage, and therefore so should the amount of life cover.

Other uses include providing a level of family protection, setting up a policy with a level of cover which would help your loved ones through the difficult times to ensure any financial pressures are removed.

Decreasing Life Insurance

Decreasing Life insurance is most commonly used to protect a repayment mortgage. The policy will be taken out for the length of the mortgage and the level of cover will decline over time in line with you repaying your mortgage and reducing this debt to zero.

Decreasing term insurance is the most cost-effective form of life insurance for repayment mortgages as the risk to insurer declines over time as the level of cover falls. As a result the monthly premiums are lower than a Level Life Insurance policy.

What is Whole of Life Insurance?

Whole of Life Insurance is very different from the two types of Life Insurance outlined above.

This is because Whole of Life Insurance doesn’t expire after a set term – it covers you for your whole life, paying out on your eventual death, whenever that may be, providing you keep paying the premiums.

Given that a payout is assured with Whole of Life Cover, it’s sometimes known as Whole of Life Assurance. It also means that premiums are typically more expensive than for a term policy.

Payouts from a Whole of Life Insurance policy are often used to cover funerals or to meet inheritance tax bills as both are liabilities that will definitely arise on death, whenever that may be.

Single or Joint Life Insurance?

A single Life Insurance policy is written on just one life, whereas a joint policy is written on the lives of a couple.

Couples Life Insurance is typically suited to those who share joint liabilities, such as a mortgage and dependents, and would therefore need a Life Insurance payout if one half of the couple were to pass away.

However, getting Joint Life Insurance may not be the best option for all couples. This is because such policies only pay out once, usually (although not exclusively) on the death of the first policyholder.

This would then leave the surviving policyholder without any cover should they later pass away.

It would also only pay out once on the tragic event that the couple both died at the same time, despite both being named on the policy.

It may make more sense for couples to get two separate single Life Insurance policies. This would ensure two payouts and could therefore be of greater benefit to any dependents.

It’s not typically much more expensive to get two single policies – ask your adviser whether this would be a better route for you.

Sam Barr-Worsfold
Independent Protection Expert at Drewberry

Should I Add Critical Illness Cover?

Most Life Insurance plans have the option of including Critical Illness Cover.

Where Life Insurance only pays out on death, a Critical Illness plan pays out the sum assured should you be diagnosed with any one of the critical illnesses as defined by the insurer’s terms.

These conditions include the likes of cancer, heart attack and stroke, which represent the top three claims on all such policies.

Given the risk of suffering a serious illness is a lot higher than that of dying, the monthly premium will increase to include critical illness cover in your policy.

However, should you suffer a serious illness there are often lifestyle changes to make, whether that be reducing working hours, stopping work completely or modifications to your home which can all have a considerably impact on your finances. This is where Critical Illness Cover can step in to help.

Many individuals opt for Critical Illness Cover for the peace of mind it offers should something serious happen.

Having seen it first hand, I can’t emphasis enough the power of financial support in helping people get back on their feet. For some people it can quite literally mean the difference between life and death.

Kevin Carr
CEO of Protection Review and Co-Chairman of the Income Protection Task Force (IPTF)

What About Income Protection?

Income Protection is another form of sickness insurance that you can buy separately from Life Insurance.

While you can’t package it together with Life Insurance as you can Critical Illness Cover, it’s nonetheless a valuable benefit to consider.

Income Protection is designed to pay out for anything that medically prevents you from doing your job – the illness / injury doesn’t have to be critical as defined by the insurer’s terms.

It also pays out what some people may find a more manageable monthly income (a percentage of your pre-tax earnings) as opposed to the lump sum offered by Critical Illness Insurance.

Do I Need to Write My Life Assurance Policy Into Trust?

Writing a Life Insurance policy into trust means at claims stage the benefit is paid from the life insurer directly into the trust to then be distributed to the nominated beneficiaries.

Writing a policy into trust is the best way to ensure your loved ones receive the payout out quickly and the lump sum gets paid to the correct beneficiaries tax free.

A trust means the payout avoids both probate and any inheritance tax so your family receive 100% of the benefit.

Writing Life Insurance into trust may sound complicated, but it’s something we help clients with on a daily basis. It only requires a few signatures on a couple of forms or, even more conveniently, can increasingly be done online at application. Ask your adviser whether you’d benefit from a Life Insurance trust.

Michael Barrow
Independent Protection Expert at Drewberry

How Much Does Life Insurance Cost?

The cost of Life Assurance will depend on a number of different factors, with the main five being:

• How much you choose to insure your life for
• How long you want to insure your life for
• The sort of life insurance policy you choose (e.g. Level / Decreasing Term Assurance, Family Income Benefit or Whole of Life Assurance)
• Your current state of health and any pre-existing medical conditions
• Your smoker status.

In the below table, we’ve laid out the monthly cost of Life Insurance for a smoker and non-smoker of various ages.

They’re all looking to insure themselves for £250,000 of Level Life Insurance over 25 years and have no untoward medical history that would impact premiums.

The quotes shown represent the best Life Insurance quotes from across the entire UK market, as of February 20th, 2019.

Top 10 UK Life Insurance Companies

Some of the best UK life insurers include:

• Aegon
• AIG
• Aviva
• Guardian
• Legal & General
• Liverpool Victoria
• Royal London
• Scottish Widows
• Vitality
• Zurich

Of course, there a number of factors you should look at when comparing Life Insurance companies to find out which one is the best for you.

Most life insurers, like all insurers, publish their policy documents on their website, so you can see the level of cover you might be getting if you chose them.

We’ve provided a brief summary of the cover offered by the UK’s leading Term Life Insurance companies in the table below, but for more detail it always pays to check the policy wording carefully.

	Aegon Aegon’s Scotland-based UK operations are wholly owned and operated by Dutch insurer Aegon N.V. Minimum entry age: 18 Maximum entry age: 89 Minimum term: 1 year Maximum term: 50 years (cover must end before an individual’s 90th birthday) Maximum cover: Unlimited
	AIG US insurance giant American International Group, Inc. (AIG) was first founded in 1919 and since then has grown to operate on a global scale. It provides a range of protection products for both individuals and businesses. Minimum entry age: 18 Maximum entry age: 88 Minimum term: 2 years Maximum term: 70 years (cover must end before an individual’s 90th birthday) Maximum cover: Unlimited
	Aviva Aviva was founded in 1797, but the Aviva brand as it is today was formed in 2000 by the merger of Norwich Union and CGU PLC. Minimum entry age: 18 Maximum entry age: 89 Minimum term: 1 year Maximum term: 50 years (cover must end before an individual’s 90th birthday) Maximum cover: Unlimited
	Guardian Guardian is a relaunched protection brand with a number of unique features to its policies. Minimum entry age: 18 Maximum entry age: 65 Minimum term: 1 year (Level and Increasing Cover) / 5 years (Decreasing cover) Maximum term: 72 years (cover must end before an individual’s 90th birthday) Maximum cover: £15 million
	Legal & General L&G was formed as an insurance company for lawyers, by lawyers in 1836. It has since grown to become one of the country’s best-known financial services companies Minimum entry age: 18 Maximum entry age: 77 Minimum term: 1 year (Level Cover) / 5 years (Decreasing cover) Maximum term: 50 years (cover must end before an individual’s 90th birthday) Maximum cover: Unlimited
	Liverpool Victoria LV is the UK’s largest friendly society, with more than 5.8 million customers, 1.1 million of whom are members. Minimum entry age: 17 Maximum entry age: 79 (Level or Decreasing cover) / 59 (inflation-linked cover) Minimum term: 5 years Maximum term: 45 years Maximum cover: Unlimited
	Royal London Royal London previously operated Scottish Provident and Bright Grey as separated brands providing Critical Illness Insurance under the Royal London umbrella. From 2016, both were merged into the main Royal London brand. Minimum entry age: 18 Maximum entry age: 70 Minimum term: 1 year Maximum term: 72 years Maximum cover: Unlimited
	Scottish Widows Founded in 1812, Scottish Widows is today part of Lloyds Banking Group. Minimum entry age: 18 Maximum entry age: 79 (must end before individual’s 90th birthday) Minimum term: 1 year (Level and Increasing) / 3 years (Decreasing) Maximum term: 72 years Maximum cover: £25,000,000 (Level and Decreasing) / £15,000,000 (Increasing)
	Vitality Vitality entered the UK market in 2007 with a joint venture with PruHealth and PruProtect, part of the Prudential Group. It has since bought out Prudential and is now branded solely as Vitality. Minimum entry age: 16 Maximum entry age: 74 (cover must end before age 90) Minimum term: 5 years Maximum term: No maximum (cover must end before age 90) Maximum cover: £20,000,000
	Zurich Zurich is a Swiss-based global insurance giant, operating in more than 170 countries. It employs around 55,000 employees worldwide, including 4,500 in the UK. Minimum entry age: 16 Maximum entry age: 83 (must end before individual’s 90th birthday) Minimum term: 1 year Maximum term: 50 years Maximum cover: £40 million

Get Life Insurance Quotes & Expert Advice

As an independent Life Insurance intermediary, we are on hand to answer any questions and provide guidance to ensure you can make an informed decision when considering Life Assurance.

Why Speak to Us…

We started Drewberry because we were tired of being treated like a number and not getting the service we all deserve when it comes to things as important as protecting our health and our finances. Below are just a few reasons why it makes sense to let us help.

• There is no fee for our service
• We are independent and impartial
  Drewberry isn’t tied to any insurance company, so we can provide completely impartial advice to make sure you get the most appropriate policy based solely on your needs.
• We’ve got bargaining power on our side
  This allows us to negotiate better premiums for you than you going direct yourself.
• You’ll speak to a dedicated expert from start to finish
  You will speak to a named expert with a direct telephone and email. No more automated machines and no more being sent from pillar to post – you’ll have someone to speak to who knows you.
• Benefit from our 5-star service
  We pride ourselves on providing a 5-star service, as can be seen from our 3900 and growing independent client reviews rating us at 4.92 / 5.
• Gain the protection of regulated advice
  You are protected. Where we provide a regulated advice service we are responsible for the policy we set-up for you. Doing it yourself or going direct to an insurer won’t provide this protection, so you won’t benefit from these securities.
• Claims support when you need it the most
  You have support should you need to make a claim. The most important thing when it comes to insurance is that claims are paid and quickly. We are here to support you during the claims process and make sure it’s as smooth and stress free as possible.

We have developed this website to provide you with as much information as possible however if you would rather speak to an expert over the phone and take advantage of the considerable knowledge base our in-house experts have then please do not hesitate to contact us on 02084327333.

Tom Conner
Director at Drewberry