Life Insurance is there to pay out a sum of money – either as a lump sum or a regular income – if you pass away while the policy is in force.
There are different types of policy and, as such, which Life Insurance is best for you will depend on your individual circumstances and what you require the policy for.
Although no single answer can be given, there are a number of factors you can look at to help you judge the quality of a Life Insurance policy. These include:
The size of payouts can’t really be used to determine the quality of a Life Insurance policy, as this will depend on the amount that each individual client has chosen to cover themselves for.
You also need to think about value for money, as simply paying the most expensive premium won’t necessarily guarantee you the best life cover. You’re looking for the right policy at the right price, so think about a product:
Before thinking about any detailed consideration of the best Life Insurance, you need to decide what type of life protection policy is right for you and your circumstances.
For example, a Decreasing Term Life Insurance policy may be right if you want to protect your loved ones until your repayment mortgage is paid off as the amount insured will fall alongside your outstanding mortgage balance.
A Level Term Life Insurance policy, meanwhile, is generally more suited to family protection or ensuring an interest-only mortgage, where the capital balance doesn’t fall over time, remains protected throughout your mortgage term.
Family Income Benefit is a type of Life Insurance which, rather than paying out a lump sum, pays out a regular income (either monthly or annually) to your dependents after your death.
This provides a much more manageable payout than a single lump sum and tends to be best for ensuring your loved ones can maintain their lifestyle should you pass away.
Whole of Life Insurance could be the right option if you want to ensure your loved ones have a lump sum after you’ve gone, possibly to pay funeral costs or meet an inheritance tax bill, as there is no set term – the policy lasts until your death providing you keep paying the premiums.
Before asking the question which is the best Life Insurance it is important to make sure it is appropriate. Life Insurance is really only valuable if you would be leaving loved ones or an outstanding debt behind.
For many of us there are families who would be left in financial difficulty or mortgages that need repaying. That’s where Life Insurance can step in to provide invaluable financial support should the worst happen.
Unfortunately death is a risk we often shy away from thinking about, underestimating the chances of it happening and the impact it would have on those around us.
Below is data taken from our Life Expectancy Calculator which is powered by ONS Data showing the likelihood of passing away at various ages.
|Age 30||Age 40||Age 50|
|1 in 112||1 in 53||1 in 23|
Insurer Liverpool Victoria are very transparent with their claims data publishing the following statistics with regards to their Life Insurance policyholders.
Life Insurance has few standard exclusions however most policies tend to exclude the following.
Suicide is excluded with most insurers however it is often only excluded for a set period of time after taking out the policy – typically 12 months.
If you are going to spend your hard earned money on a Life Insurance policy you want to know if the worst did happen that it would pay out.
In 2017, the Association of British Insurers collated the industries claims statistics and published results showing 98% of term insurance claims were successful, as were 99.99% of whole of life claims.
For the small proportion of claims that weren’t paid, the ABI cites that this was largely due to clients not disclosing important information when taking out the policy, or claiming for a condition that is not covered by the policy.
When setting up your policy it is important to be as open and honest as possible with regards to existing health conditions and any hazardous pursuits you may undertake. It can be really valuable speaking to an adviser to make sure you have done everything you can to submit an accurate application.
If you need any help them please do not hesitate to pop us a call on 02084327333, our advisers are here to make sure you have everything set-up correctly.
The cost of Life Insurance will depend on various different factors, with the main five being:
In the below table, we’ve laid out the monthly cost of Life Insurance for a smoker and non-smoker of various ages. They’re all looking for £250,000 worth of Level Life Insurance over 25 years and have no untoward medical history that would impact their premiums.
The quotes shown represent the best Life Insurance quotes from across the entire UK market, as of February 20th, 2019.
30 Years Old
40 Years Old
50 Years Old
Many of the best Life Insurance policies will have additional benefits above and beyond offering a payout on the policyholder’s death. These may be included as standard or offered for an additional premium.
It may seem natural to assume that the ‘best’ policy has the widest range of such additional cover areas, but consider what it is that you actually need and want.
Paying for more cover than you need is not the way to find the best Life Insurance, but some of the cover areas to think about include:
Most Life Insurance policies will offer Critical Illness Insurance as an add-on. If you choose this cover, it will increase the price of your premium; however, this is likely to be a better choice in terms of price than taking out Life Insurance plus a separate critical illness cover (CIC) policy.
If you add CIC to Life Insurance, the main thing to be aware of is whether you’re buying an independent policy or an integrated one.
With an integrated policy there can be only one payout, meaning that – should you make a successful critical illness claim for the full sum assured – there will be no further payout from the Life Insurance after you die.
Independent critical illness cover allows the Life Insurance element of the policy to continue after a successful critical illness claim.
Terminal illness cover is usually a standard feature of Life Insurance policies, allowing for a payout to be made before the policyholder’s death if they’re diagnosed with a terminal condition (having less than 12 months to live).
If the prognosis is that you’ll survive for less than 12 months, most Life Insurance policies will pay out early on Terminal Illness Benefit, meaning you have some financial support for you and your loved ones during this difficult time.
Independent Protection Expert at Drewberry
Generally, guaranteed Life Insurance premiums – where the monthly sum you pay doesn’t change through the life of the policy – are seen as ‘better’ than reviewable Life Insurance premiums.
This is because the insurer can’t change the amount they charge you
Reviewable premiums may be cheaper at the outset of the policy, but could prove significantly more expensive in the longer term as insurers are free to raise 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.
This option can mean that, if you find yourself in unfortunate circumstances, your Life Insurance policy remains in place without you having to continue to make premium payments; this may be, for example, if you can’t work because you’ve become seriously ill.
Policies can come with an enormous range of flexible options that can seem great to cope with changing, unpredictable circumstances. But you also need to remember that the more flexibility you build into a product, the more you’re likely to pay in premiums.
Some common options include:
It’s often best to write a Life Insurance policy into trust, but there are times when it may not be needed.
If you’re married and taking out a joint Life Insurance policy, for example, the payout usually goes directly to the remaining policyholder (your husband / wife / civil partner), so a writing your joint Life Insurance policy into trust isn’t usually needed.
However, if you were both to die at the same time, or the joint life policy is written on a second life basis, then writing the policy into trust would be of benefit. Writing your Life Insurance policy in trust costs nothing and can cut delays with probate, so it’s often worth it.
A discretionary trust is probably the best answer for joint Life Insurance policies, as these can be specifically designed to pay out to the second partner on request, if they survive at least 30 days after the first death occurs.
No, you don’t need Mortgage Life Insurance to get a mortgage. It’s not a legal or regulatory requirement.
However, you need to consider what would happen to that mortgage if you were to pass away before repaying the debt.
Could your family take on the debt and meet the mortgage repayments if they wanted to continue living in the property? If not, would they have to uproot themselves and downsize to something more affordable?
Life Insurance will repay the mortgage should you pass away, meaning your loved ones don’t have to worry about how to afford housing costs after you’re gone.
Writing Life Insurance policies into trust sounds complicated, but it’s something that we handle every day here at Drewberry and we’re more than happy to help with the process.
Essentially, putting Life Insurance into trust means that you’re ring-fencing the benefit outside of your estate so that should a claim arise the payout goes into the trust rather than to you. This can help avoid probate and ensure the benefit is paid swiftly whilst removing the worry of inheritance tax on the payout ensuring your family gets the full benefit you were intending.
Should you pass away, the money is paid into the trust. It’s then up to the trustees — trusted people you designated to run the trust when you set it up — to distribute the funds to your beneficiaries.
Writing your Life Insurance into trust can also be useful where your children might be minors when they receive the policy payout, as it gives supervision and oversight over their finances after you’re gone.
This is a very subjective question and something we’d always recommend you discuss with one of our experts to make sure you get it right.
If you have a mortgage, you may want at least enough to repay that debt should you die before managing to do so yourself.
Then there’s family protection to consider. Many people want to leave some kind of legacy for their loved ones after they’re gone but aren’t sure how much they’d need.
For this reason, it may be helpful to consider Family Income Benefit, an often-overlooked type of Life Insurance that breaks down the payout into more manageable chunks rather than paying it out all at once.
That way your family could have a monthly or annual income from the policy for a set term after you pass away rather than just having a much larger lump sum and being unsure regarding the best thing to do with it.
Terminal Illness Insurance comes as a free rider on Life Insurance policies. You don’t have to pay any extra for having it.
It triggers a payout on the policy early if you’re diagnosed as terminally ill, with a doctor having told you that you have less than 12 months to live.
This allows you to receive the benefit early, relieving you of financial worries during such a difficult time. It is important to recognise Terminal Illness Benefit is very different to Critical Illness Insurance.
Whole of Life Insurance is designed to cover you for your whole life and pay out on your death, whenever that may be. The payment is assured so long as you keep paying your premiums and will pay out on your eventual death.
For this reason, Whole of Life Insurance is typically much more expensive than Term Insurance and is therefore usually used to cover smaller amounts, such as funeral costs or small debts.
While it may seem ‘better’ that you’re guaranteed a payout with Whole of Life Insurance, this guarantee would make insuring any significant sum prohibitively expensive for many.
Term Insurance, on the other hand, lasts for a set term, say 25 years, and then ends. It’s commonly used alongside a mortgage to repay the debt should you pass away before doing so, or for other family protection purposes, such as ensuring children will be financially secure until they’re independent.
It’s much more cost-effective than Whole of Life Insurance because the payout only occurs if you die within a set period, rather than on your certain death.
Some of the best UK Life Insurance companies on the market today include:
Of course, there a number of factors you should look at when comparing Life Insurance companies to find out which one is the best for you.
Most life insurers, like all insurers, publish their policy documents on their website, so you can see the level of cover you might be getting if you chose them.
We’ve provided a brief summary of the cover offered by the UK’s leading Life Insurance companies in the table below (for term assurance, the most commonly-purchased type of Life Insurance), but for more detail it always pays to check the policy wording carefully.
Aegon’s Scotland-based UK operations are wholly owned and operated by Dutch insurer Aegon N.V.
US 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.
Aviva 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.
Guardian is a relaunched protection brand with a number of unique features to its policies.
L&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
LV is the UK’s largest friendly society, with more than 5.8 million customers, 1.1 million of whom are members.
Royal 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.
Founded in 1812, Scottish Widows is today part of Lloyds Banking Group.
Vitality 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.
Zurich 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.
We exist to help you find the best life insurance for your circumstances and do so at the most competitive premiums. We are completely independent so can provide you with all the advice you need to make an informed decision.
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.
We are here to help.
If it is all getting a little confusing and you need some guidance then please do not hesitate to pop us a call on 02084327333 or email email@example.com.
Director at Drewberry
Great service assisting me obtain the right product. Would happily recommend Drewberry following their professional and efficient way of working.