Types of Insurance

Life Insurance

Also called life assurance in the UK, life insurance is a contract between the policyholder and a life insurance company.

This type of insurance policy provides a sum of money in the event of the death of the insurance holder or holders, which is paid to the beneficiary or beneficiaries.

How much life insurance is paid out?

The amount paid out by the insurance company, the sum assured, will depend on the size of the policy and the financial requirement for peace of mind.

Life insurance is required if you going to take out a mortgage

Life insurance is a common type of insurance policy and although not a legal requirement, is essential protection for those with dependants or an outstanding debt like a mortgage.

Life insurance policies vary considerably depending on the circumstances of the policyholder, and there are many life insurance options.

Mortgage Protection Insurance

Term life insurance is also known as mortgage protection insurance and is a protection-only insurance.

Term life insurance provides life insurance cover at a fixed rate of payment for a set time, which is usually the length of the mortgage.

Once the term expires, the policyholder must either forego cover or potentially obtain further cover.

What happens if the policyholder dies?

Term insurance, in its simplest form, pays out a specified amount if you die within a selected period of years. If you survive, it pays out nothing. The death benefit will be paid to the beneficiary by the insurance company.

Term insurance is one of the cheapest ways of getting life insurance cover for a fixed time, at a fixed rate of payments.

When do you need term insurance?

Term insurance varies from whole of life insurance, which covers the policyholder at fixed premiums for life. Because term insurance provides a death benefit, it is often used to cover financial responsibilities such as a mortgage.

Whole Life Insurance

Whole life insurance is a type of policy that remains valid for the life of the policyholder.

A whole-of-life policy is one form of investment-type policy. As the name suggests, this provides cover for as long as you live.

Since the policy must eventually pay out, it builds up an investment value that you can cash in by surrendering the policy.

Whole life insurance is more expensive

However, it takes many years for a surrender value to build up and, in general, whole-of-life policies are an expensive buy if your main need is protection. A variation called a 'maximum protection policy' lets you buy a high level of cover at a premium that is initially very low. You should always avoid taking out an endowment policy if your primary need is protection.

The payment on a whole life policy is inevitable. Although there are different types of whole life insurance, part of the premiums are paid into an investment fund to pay out the benefit on death.

Critical Illness

Critical illness insurance cover pays out a lump sum in the event of the policyholder being diagnosed with a critical illness that meets the policy definition of the insurance company.

Insurance companies only cover the critical illnesses that are defined within the policy.

There are several different types of critical illness insurance, and critical illness cover is also added to life insurance policies.

When does Critical Ilness cover pay out?

Critical illness cover pays out a fixed cash amount in the event of diagnosis, and can be added to life insurance or mortgage life insurance policies. The aim of critical illness cover is to protect the future of the policyholder. The tax-free lump sum can be used however the policyholder decides – including paying off their mortgage or covering medical costs.

Over 50s Life Insurance

Life insurance for over 50s is designed to help you provide financially for your loved ones in the event of your death.

Over 50s may use this to cover funeral expenses, unpaid bills or even to leave a nestegg for their family.

What are the Over 50 Life Insurance stipulations?

In order to qualify for life insurance, you must be aged between 50 and 80 and reside in the UK for at least 183 days a year. You won't need to complete a medical assessment either.

How much does Over 50s Life Insurance cost?

Over 50s life insurance premiums start at £8 per month. Although there are a number of different plans for over 50s, the most common life insurance policy will provide your family with a cash lump sum in the event of your death.