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What is life insurance?
Life insurance is a type of insurance contract which pays out a lump sum to your dependants should you pass away during the term of the contract. The cost of a policy is determined by a number of factors including your age, health and lifestyle.
Why do you need life insurance?
Life insurance can help your partner or children continue to pay for any financial commitments you have that might then fall to them to pay if you were no longer here.
Life insurance can help to make sure your dependants would then be able to keep up with any mortgage repayments and bills you pay if you passed away. The lump sum payout they would receive could also help to pay for other things you would usually help to cover, like food bills and schooling.
What’s the average cost of life insurance and what affects the price?
The cost will vary depending on factors such as your age, health, occupation, whether you smoke, length of the term and whether you choose add-ons such as critical illness cover.
MoneySuperMarket found that non-smokers on average save £3.62 a month for life insurance compared to smokers. And adding critical illness cover, which pays out on the diagnosis of one of a list of serious medical conditions, typically increases your payments by almost £7.91 per month*.
Because the payout amount for decreasing term life insurance policies will be less than a level term policy payout if you pass away towards the end of the term, decreasing life insurance can be cheaper than level term.
The actual cost of life insurance for you will depend on the sum insured and your individual health, lifestyle, age and family history.
*According to MoneySuperMarket customers searching for single person life insurance policies with or without critical illness cover, aged 20 – 30 years-old and looking for a cover amount of £150,000 - £200,000 for a 10 – 20 year level term, from January – September 2018.
Getting a life insurance quote
Life insurance is hugely important if you have dependants. It’s there to provide money if you die during the term of your policy.
You can add your spouse or partner to the policy as well. And it’s also possible to include critical illness cover, so that you’ll receive a pay-out from the policy on diagnosis of a severe ailment or condition.
But most of us have little or no experience of buying life insurance. After all, policies can last for 10, 15 or 20 years or even longer, so it’s not as if we’re going through the process every 12 months as we do with car and home insurance.
That’s why we are constantly striving to improve the way you can get a quotation and buy your policy.
MoneySuperMarket works with a number of the UK’s leading life insurance companies to offer you high quality cover at a competitive price.
When you run a quote with MoneySuperMarket, we’ll ask you a range of questions relating to your health, lifestyle and background.
We ask these questions to see if we can offer you a personalised quote which reflects your individual circumstances. These are shown as ‘guaranteed’ prices that you can access immediately through MoneySuperMarket: the price you see is the price you pay.
You may also see some prices marked as ‘referred’. This means you will need to confirm some details before they can guarantee a price. The life insurance provider will let us know what extra information they need, and a member of the MoneySuperMarket team will be in touch to help you complete your quote.
Please refer to our FAQ page for more information.
Are there life insurance policies which come with a gift?
You can compare a wide range of life insurance policies on our comparison tables. And if you take out life cover through MoneySuperMarket, you will receive a £100 gift card from Argos, M&S or Next.
Your voucher of choice is redeemable within 40 days of your sixth life insurance payment. T&Cs apply. Customers who have received a promotional voucher/gift card previously are not eligible for this promotional offer. You can find out more here.
Get a £100 gift card when you take out Life Cover through MoneySuperMarket
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How much does life insurance cost?
MoneySuperMarket data found that the average monthly cost of life insurance for a 30-39 year-old was £9.64*.
The cost of life insurance can be influenced by the cover type you choose (single or joint life insurance) and the life insurance term you choose (level or decreasing term).
Your monthly payments will also be influenced by the amount of cover you need and your health and lifestyle.
*The average cost above is based on MoneySuperMarket customers looking for single life insurance only (without critical illness cover), for a level term policy with a total cover amount between £150,000 and £200,000 for 10 – 20 years, from January to December 2018.
How much life insurance do you need?
The amount of life insurance cover you take out would ideally be enough to cover your mortgage repayments and the needs of your family if you were no longer around.
The average cover amount that consumers searching for single life insurance look to take out is £150,000. The average cover amount that consumers searching for joint life insurance look to take out is £183,000, according to MoneySuperMarket data from January – September 2018. This amount also includes critical illness cover where it has been added to a policy.
When should you get life insurance?
If you’re in a position where a partner or a child relies on you financially, and they would struggle to pay for the things you pay for or help to pay for if you were no longer around (for example, a mortgage), then this would be a good time to think about life insurance.
Do you need life insurance to take out a mortgage?
Life insurance isn’t a legal requirement, but most mortgage lenders will insist on you having life insurance.
What does it mean to put a life insurance policy in trust?
Putting your life insurance policy in trust lets you name the people you want to receive your life insurance payout (your trustees).
There are different types of trusts available depending on your individual or family circumstances.
Putting your life insurance policy in trust also takes your policy outside the scope of inheritance tax. This means there won’t be any tax charged on your life insurance policy payout.
When should you update your life insurance policy?
It can be a good idea to think about updating your life insurance policy if:
- Your health or lifestyle has changed
- Your financial situation has changed (your salary or mortgage might have increased)
- Your family has grown
- Your relationship with your dependant has changed – although you will need to check your insurer can do this for you
If you aren’t able to update your life insurance policy then you might be able to find a policy with a different provider that suits your new situation better. It’s always a good idea to get a personalised quote to see if your current insurance is the best option that’s available to you.
Can you get life insurance if you have a pre-existing medical condition?
Most life insurance providers that offer cover will be able to insure you if you have pre-existing medical conditions, but you may need to compare online before you find one.
If you have a more complex condition and you’re finding it difficult to get a price online, a broker or advisor can help you find a provider that will cover you. We work with life insurance advisors LifeSearch who can help you find a life insurance policy if you have a pre-existing medical condition that means you can’t be insured online.
You’ll most likely need to share additional medical information and copies of any tests with a provider to help them understand the risk level of your condition. You’ll be asked to sign a medical release form and the insurer will then request this information from your doctor.
You can end up paying more for your pre-existing life insurance because of this risk. But it’s important to declare any pre-existing medical conditions when taking out life insurance because if you don’t, your insurer can refuse to pay out for any claims.
What happens to your life insurance policy if you can’t meet your payments?
If you aren’t able to work because of an illness or injury – which then means you’re unable to afford your monthly life insurance payments – then a waiver of premium could mean you’ll be covered during this time.
This will need to be added to your policy as an additional level of cover and it will need to be taken out from the start of your life insurance policy.
Can you claim on your own life insurance policy for a terminal illness?
If you’ve been diagnosed with a terminal illness and a doctor has given a prognosis of less than 12 months to live then you may be able to make a terminal illness claim on your own life insurance policy.
This means you would receive the payout now – instead of your dependant receiving the payout once you’ve passed away – and can help to cover the cost of not being able to work during your final months and getting your affairs in order.
Some insurers offer terminal illness cover as part of their standard life insurance policy. With some, you’ll need to add terminal illness cover as an extra level of cover. There will be terms and conditions with both options so you’ll need to read the policy documents to make sure you would be covered.
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