Life insurance

Most term life insurance policies have both minimum and maximum age limits for when you can apply.

The upper age limit is usually between 65 and 80, depending on the insurer and the type of cover. Once your policy is active, it will continue until the end of the term you’ve chosen.

If you’re older, there are also specialist life insurance policies designed with higher or no upper age limits. Over 50s life insurance is one example.

Yes, there are no legal limits to how many protection insurance policies you can have at once.

It is common for people to supplement their life insurance with cover that financially protects them if they were unable to work for a prolonged period of time.

This cover can take the form of:

• Critical illness cover - Pays out if you are diagnosed with a serious illness.

• Income protection insurance - Pays out a percentage of your salary if you temporarily cannot work because of an accident, illness or redundancy.

A waiting period is a set amount of time at the start of a life insurance policy when certain causes of death or illness aren’t covered. If the policyholder dies during this period, the insurer may not pay out.

The most common waiting period applies to death by suicide, which is usually excluded for the first 12 to 24 months after the policy begins. This rule is designed to prevent immediate claims following the policy start date.

Some whole of life or over-50s policies also have a waiting period for death from natural causes, often lasting one or two years. During that time, the insurer will only pay out for accidental death; if death occurs from illness or natural causes, the policyholder’s premiums are usually refunded instead.

It is not a legal requirement to have life insurance for a mortgage, but some lenders may insist on it as a condition of lending. Even if your lender does not require it, life insurance can help ensure your family can continue to make mortgage repayments if you die. You are free to choose your own life insurance provider; you do not have to use the one your lender suggests.

Possibly. A pension is designed to provide an income during retirement, while life insurance is intended to provide financial support to your loved ones after your death.

Whether you need life insurance depends on your circumstances. If you have dependants, a mortgage or other financial commitments that would remain after your death, life insurance could still be worthwhile even if you have a pension.

If you get divorced or separate, you should review your life insurance as soon as possible.

If you have a single life insurance policy, you can usually keep it, but you may want to change the beneficiary so the payout doesn’t go to your ex-partner. Beneficiaries don’t change automatically, so you’ll need to update them with your insurer.

If you have a joint life insurance policy, you’ll normally need to take action. Your options may include:

• splitting the policy into two single policies (if your insurer offers a separation benefit)

• one person taking over the policy

• cancelling the policy and arranging new cover

Be aware that cancelling and taking out a new policy later can be more expensive, as premiums usually increase with age and you may need new medical checks.

In some cases, divorce or separation agreements require life insurance to stay in place for the benefit of children or an ex-partner. If this applies to you, it’s a good idea to get legal advice before making changes.

Yes. Life insurance for the self-employed works the same way as for employees, but you won’t usually have employer benefits like death-in-service cover.

Life insurance can help protect:

• family members who rely on your income

• business partners or co-owners

• the business itself, by helping cover debts or fund ownership changes

Some business owners also consider key person insurance, which is designed to protect a business if someone critical to its success dies.

You should review your life insurance whenever your circumstances change, including if you:

• get married, separate or divorce

• move in with a partner

• have a child

• buy or pay off a mortgage

• start or leave a business

• take on new financial responsibilities

Life insurance doesn’t update automatically, so you may need to change your beneficiaries, cover amount or policy type to make sure it still meets your needs.

Even without major changes, it’s a good idea to review your policy every few years.

Life insurance payouts are generally not subject to income tax or capital gains tax in the UK. However, if the payout forms part of your estate, it may be subject to inheritance tax if your estate exceeds the nil-rate band. Writing your policy into a trust can help ensure the payout goes directly to your beneficiaries without being included in your estate for inheritance tax purposes.

It depends on your insurer and policy type. Some providers allow you to adjust your cover level, extend or shorten your term, or add extras such as critical illness cover after your policy has started. Others may require you to take out a new policy if you want to make significant changes. Check your policy terms or contact your insurer to find out what options are available to you.

If you miss a payment, your life insurance policy may lapse, meaning you lose your cover and would not receive a payout if you died.

Most insurers offer a short grace period during which you can make up a missed payment without losing cover. Some policies offer a waiver of premium option, which keeps your cover active if you cannot work due to illness or injury.

Not as standard. Most life insurance policies pay a fixed amount, so the real value of your payout may decrease over time as the cost of living rises.

Some policies offer an indexation option, which increases your cover (and premium) each year in line with inflation. This is worth considering if you are taking out a long-term policy.

No payout is made. If you outlive the term of a level term or decreasing term policy, the cover simply ends. You do not receive a refund of the premiums you have paid.

If you still need cover, you can apply for a new policy, though your age and health at that point will affect the cost. Alternatively, a whole-of-life policy guarantees a payout whenever you die, regardless of when that is.