What Is The UK's Best Life Insurance In 2024?
Read our 2024 Best Life Insurance UK Guide, get expert advice and compare online quotes from AIG, Zurich, and other top UK insurers...
No one wants to think about it, but most of us would want our loved ones to be protected should the worst happen and we were to pass away.
This protection might come in the form of a protection policy that repays an outstanding mortgage or helps maintain a family’s standard of living should you die.
Policies can come in many different forms, but there should be options available for most adults. The broadest distinction in policies tends to be between:
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.
According to the Association of British Insurers (ABI), in 2021 the average payout on a term life insurance policy was £80,485 with 97.3% of claims being paid.
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 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 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.
Is it possible to buy Life Insurance if you’re already retired? Our very own, Ben Brooks, is here to give an expert overview on your options in retirement. Just press play. 👇
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.
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.
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.
“When claims are declined this is usually due to the customer not disclosing important information when taking out the policy, or claiming for a condition that is not covered by the policy,” says the ABI.
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.
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:
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:
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:
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.
AegonAegon’s Scotland-based UK operations are wholly owned and operated by Dutch insurer Aegon N.V.
| |
AIGUS 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.
| |
AvivaAviva 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.
| |
GuardianGuardian is a relaunched protection brand with a number of unique features to its policies.
| |
Legal & GeneralL&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
| |
Liverpool VictoriaLV is the UK’s largest friendly society, with more than 5.8 million customers, 1.1 million of whom are members.
| |
Royal LondonRoyal 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.
| |
Scottish WidowsFounded in 1812, Scottish Widows is today part of Lloyds Banking Group.
| |
VitalityVitality 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.
| |
ZurichZurich 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.
|
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.
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.
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