Types of life insurance
What type of life insurance do I need?
There are many different life insurance policies to choose from, so here’s a rundown of what’s out there so you can find the right cover
There are many different life insurance policies to choose from, so here’s a rundown of what’s out there so you can find the right cover
Life insurance policies come in multiple forms, and the type you need will depend on a number of factors – before you take out life cover, ask yourself:
When you take out life insurance consider how long you need the cover to last – some policies will cover you for the whole of your life, while others only for a set amount of time. However there are also different types of term policy depending on what you would prefer to happen once the time period ends.
A whole-of-life insurance policy offers protection for your lifetime, from the moment you take cover out until you die – when there will be a guaranteed pay-out. As you might expect, this type of life insurance is much more expensive than other types of policy which last for a set time period.
A term policy only covers you for a specific amount of time, during which your insurer will pay out to your dependants if you pass way. If the term ends and you’re still alive, the policy simply lapses and you won’t get anything else out of it.
You should also consider the kind of pay-out you want your beneficiaries to receive from the policy once you’ve passed away.
If you’ve taken out a term policy, you’ll usually choose between level, decreasing and increasing term cover.
If you write your life insurance policy ‘in trust’ the sum is paid directly to your beneficiary, rather than becoming part of your estate. This can help speed the process up so your beneficiaries get their pay-out quicker, while the sum isn’t subject to inheritance tax.
Family income benefit policies pay out a regular monthly income to your beneficiaries from the date of the claim to the end of the policy term. The total amount paid out by the insurer is generally lower than under level or decreasing term policies, so the monthly income wouldn’t be enough to pay off an entire debt – but it could help stay on top of monthly mortgage payments or rent. As the pay-out is generally lower, the premiums are too.
The most suitable type of life insurance policy for you will also depend on your own personal circumstances.
If you’re in a couple you might decide to take out a joint life insurance policy – but keep in mind the pay-out structure of joint life cover works differently.
If both policy-holders die at the same time the pay-out forms part of your estate – though as mentioned above, if you write the policy in-trust the pay-out goes into a tax-free trust fund passed directly onto the beneficiaries.
As you might expect, life insurance generally becomes more expensive the older you get as your risk of passing away increases. However some providers offer specialised cover for people aged 50 or older, so these groups can find affordable life insurance.
Over-50s life insurance policies offer guaranteed acceptance, so you’ll be able to get cover regardless of your current health or lifestyle. They also offer a guaranteed pay-out providing:
Critical illness cover is something you can add to your existing life insurance, and it pays out if you’re diagnosed with a specific medical condition during the policy term. When you add it to your life insurance policy, it’ll be in the shape of additional or combined cover:
MoneySuperMarket offers the option of taking out additional critical illness cover as part of your life insurance, as we believe this offers a more flexible and comprehensive solution than a combined policy.
Terminal illness cover is entirely different to critical illness cover, and is often included as part of standard life insurance. It means the policy will pay out if your doctor confirms you have a terminal illness and are likely to pass away within 12 months – while critical illness is intended to cover you for a health condition from which you could recover.
Finding the right life insurance policy is easy when you compare quotes with MoneySuperMarket. Just tell us a little about yourself, your circumstances and the cover you need and we’ll put together a list of quotes tailored to your requirements.
You’ll be able to compare deals by the overall cost and the cover you’ll get, and once you’ve found the one you want just click through to the provider to finalise your purchase. As with all insurance products remember the cheapest option isn’t always the best – we recommend balancing cost and cover to ensure you have the right policy in place.