What Is Life Insurance?

Types of Life Insurance

Term Life Assurance

Term Life Assurance policy covers you if you die within a set period of time. You choose this period at the outset of the policy and it is often set to the length of a mortgage or the time until a child becomes an adult.

Level or decreasing term Life Insurance?

The main choice with term insurance is deciding whether you need a decreasing term policy – where the potential payout drops over time, perhaps in line with a repayment mortgage – or a level term plan, where the sum insured remains fixed across the entire term of a mortgage.

Increasing term insurance may also be an option with some providers; here, the sum assured increases by a set percentage over time. These policies are designed to counteract the impact of inflation on the final payout.

Family Income Benefit

Family Income Benefit is another term life insurance option. The main difference from a standard term policy is that a successful claim will result in the payment of a regular income rather than a lump sum.

This may be more useful for helping loved ones keep up with day-to-day living expenses by replacing a breadwinner’s lost income. It could be easier to manage than one large lump sum, especially if you’re planning to leave the benefit to children.

Whole of Life Insurance

Whole of Life Insurance is guaranteed to pay out whenever you die, assuming you’ve kept up premium payments and haven’t breached the policy terms.

Because of this guarantee, premiums are likely to be far higher than for term policies and the sum insured tends to be lower.

According to the ABI, in 2021 the average whole of life insurance claim payment was £4,125 with 99.99% of claims paid.

Some people may opt for such a policy to cover the costs of their funeral or to meet an inheritance tax bill.

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What Does Life Insurance Cover?

In the event of your death during the policy term, the benefit is paid into your estate or into a trust set up for this purpose.

The funds can be used by your loved ones however they see fit although, as mentioned, the most common usages involve repaying an outstanding mortgage and maintaining their lifestyle.

You have the option to include Critical Illness Insurance to provide a cash lump sum should you suffer a serious illness such as cancer, heart attack or stroke.

Adding Critical Illness Cover

Life insurance is frequently bundled together with Critical Illness Cover, but it’s perfectly possible to buy one without the other. However, you are likely to find that buying two separate policies isn’t as cost-effective as buying a combined one.

If you buy both types of cover together, there will be two main options open to you: an integrated policy or an independent one.

With an integrated policy there can be only one payout, meaning that – should you make a successful critical illness claim for 100% of the sum assured – there will be no further payout from the life insurance after you die. Independent Critical Illness Cover, meanwhile, allows the Life Insurance element of the policy to continue after a successful critical illness claim.

Are There Any Exclusions?

As with any sort of insurance it’s vital to read the terms and conditions and to be aware of any exclusions associated with the product.

There are likely to be restrictions on age and on the length of a term product; for example, some policies may not cover those aged over 70 at the start of the policy, while others may not commit to a term length of over 35 years.

Suicide is likely to be an exclusion, but this should only be for a set period of time – usually 12 months – after the policy is taken out. Death through alcohol / drug abuse and criminal acts are also potential exclusions.

Other exclusions can be as diverse as the range of policies available. For example, should you enjoy sailing it’s typical for cover to be offered if a fatal accident happened during recreational sailing, but it may be excluded if you were taking part in a cross-Atlantic race.

Pre-Existing Medical Conditions

The issue of pre-existing medical conditions is a key one and you’ll need to declare your medical history when you apply for Life Insurance.

Failing to do this accurately could invalidate any policy you subsequently took out. Based on your medical history, the insurer may do one of three things:

• Offer the cover on standard terms, with no increase in premiums
• Increase premiums to reflect the heightened risk
• Decline to offer you Life Insurance entirely.

How Much Does Life Insurance Cost?

The type of policy you choose, the amount you insure yourself for and the policy term are major factors in determining how much you have to pay in premiums, as are:

• Your age
• Your state of health
• Your medical history
• Your height and weight
• Whether you’re a smoker

Broadly speaking, the older you are, the unhealthier you are and the riskier your lifestyle, the more you’re likely to pay in premiums.

This is because an insurer will judge that a claim is more likely to be made on a term policy, or it will calculate that you’re likely to make fewer premium payments on a Whole of Life policy. Other things that may be taken into account include:

• Your family’s medical history
• Whether you partake in any hazardous hobbies
• Lifestyle choices such as alcohol consumption
• Optional cover areas added to the policy.

Note also that premiums can be guaranteed – meaning they won’t change in the course of a policy – or reviewable.

Choosing a reviewable premium may be cheaper at the outset, but it could prove significantly more expensive in the longer term as insurers are free to raise your premiums over time. This may happen if, for example, the provider experiences higher claim levels than it had anticipated, or if a major change in interest rates increases its cost base.

Best UK Life Insurance Companies

	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

Getting Life Insurance Advice

As with any form of insurance, the general advice to shop around for the right deal and to read the terms and conditions with care holds true.

To get an idea of the sort of options that may be open to you, try our quick and easy online Life Insurance comparison service that shows payout rates, policy terms, whether premiums are guaranteed or reviewable and the monthly cost.

But for such an important product, it’s worth taking expert advice from a firm such as Drewberry Insurance to help work out what you need.

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.

Drewberry exists to ensure you have all the information and support you need to make the right decisions when it comes to your financial protection. Please do not hesitate to give us a call if you need some guidance. You can speak to an expert adviser at Drewberry by calling 02084327333, or – to save your phone bill – arrange a call back with one of our financial advisers.

Robert Harvey
Head of Protection Advice at Drewberry