Family Life Insurance

Frequently Asked Questions

• How Much Does Family Life Insurance Cost?

  How much your family life cover will cost depends largely on a couple of key factors: the length of time and the amount you’re looking to insure yourself for as a benefit.

  

  If you’re not sure about how much Life Insurance you need, why not give one of the team at Drewberry a call? We’ll be able to go through methodically and help you decide based on current liabilities and expenditure.

  Victoria Slade
  Independent Protection Expert at Drewberry

  Other factors that affect the cost of Life Insurance include:

  • Your age
    The older you are at the start of the policy, and when you want the policy to end, the higher the risk you represent and therefore the higher the cost of cover
  • Your state of health
    Your health currently has a big impact on the cost of Family Life Insurance, particularly if you’re suffering from serious medical conditions such as diabetes or have a high BMI
  • Your medical history
    While less serious medical issues you’ve suffered in the past have little bearing on the cost of Life Insurance, more serious illnesses in the past, such as cancer, will increase the cost of cover
  • Your smoking status
    You can get Life Insurance for smokers, but the premiums will be higher due to the increased risk of death you present to the insurer.

  Calculate the Cost of Family Life Insurance and Compare Quotes

  You could go to each insurer individually and get Life Insurance quotes from all of them to find the best cover for you, but this would take a lot of time.

  Why not get a Life Insurance quote engine to compare the UK’s leading providers for you instead and save you all the legwork?

  Compare Life Insurance Quotes Online >>

  Drewberry has access to the entire UK market. While this means we can help you find the best price for Family Life Insurance, it will likely mean you’ll see a lot of options come up when you use our online Life Insurance comparison tool.

• Single or Joint Family Life Insurance?

  Spouses and civil partners, or those who have combined interests, often look to Joint Life Insurance to protect themselves and their families.

  While Joint Life Insurance is typically cheaper than two single policies, there’s a good reason for this. It’s because the policy will only pay out once, usually on the death of the first partner. This is known as joint life first death insurance.

  Most Joint Life Insurance is written on a first death basis, which can mean it’s always not particularly suitable for providing comprehensive family protection.

  This is because it leaves the surviving partner without Life Insurance on the death of the first partner, meaning nothing can be passed down to children if the first payment is used to cover a mortgage.

  The surviving partner may find getting re-insured at a later date far more expensive due to their older age and any health conditions they’ve suffered since taking out the first policy.

  

  The alternative to Joint Life Insurance is two single Life Insurance policies, one for each partner. Although this will work out slightly more expensive you’ll be securing two payouts, making this potentially a better option for protecting your family if both parents pass away.

  Michael Barrow
  Independent Protection Expert at Drewberry

• Should I Add Critical Illness Cover?

  A major consideration when it comes to Life Insurance is whether or not you should include Critical Illness Cover, which will enhance your insurance so it pays out if you develop a critical illness.

  If you do add this cover, the critical illness must be one of the ones specified by the insurer and of a specific severity.

  The most common claims on such policies are for cancer, heart attacks and strokes.

  If you do unfortunately become critically ill, the policy pays out the same lump sum as if you’d passed away.

  Having additional protection that will cover your mortgage, for instance, if you develop a serious illness or disability and can no longer provide for your family is attractive to many people.

  After all, for many people a critical illness could deal the same financial blow to the family as death, especially if the ill person is never able to work again.

  When Income Protection Could Be More Suitable…

  If you’re worried about an illness or injury stopping you working and paying the mortgage on the family home or meeting other bills and expenses it may make more sense to opt for Income Protection alongside Life Insurance.

  This covers you for any illness or injury which stops you from working and will pay out a regular income for as long as you need it, rather than just one lump sum.

  Income Protection is often seen as more comprehensive than Critical Illness Cover because it will pay out for anything that prevents you from working, regardless of severity.

• Should I Opt for Indexation?

  Another option you have is whether or not you want to index-link your Life Insurance so that your payout won’t be eroded by the effects of inflation.

  Life Insurance is a long-term product, so it’s inevitable that inflation will take a bite out of your benefit over time.

  This is less of a concern with Decreasing Term Insurance, because it is used to protect a known debt such as a repayment mortgage with the benefit designed to fall over time.

  However, if you are trying to protect your family’s standard of living until they are of an age where they are self sufficient, inflation could do a lot of damage to the real purchasing power of the benefit over time.

  In such cases opting to index your benefit amount means your family would have the same purchasing power whether a claim is made today or 20 years down the road.

• Reviewable or Guaranteed Premiums

  With Life Insurance you can choose to either guarantee your premiums so that they stay fixed (unless you’ve indexed them, in which case there’ll be an inflationary increase).

  The alternative is reviewable premiums, where the insurer can adjust your premiums each year.

  The issue with this is that you never know how much your Family Life Insurance will cost year-on-year, and your premiums could rise significantly over the course of your policy.

  

  Whether or not reviewable premiums are right for you depends on your circumstances, but they can increase the cost of cover significantly over time. Guaranteed premiums may start off more expensive, but they’ll usually work out cheaper over the life of the policy.

  Sam Barr-Worsfold
  Independent Protection Expert at Drewberry

• Will My Medical History Impact My Life Insurance Application?

  When you apply for your Life Insurance you’ll be medically underwritten, which entails you being asked a series of medical questions to assess your current state of health and therefore the level of risk you present to the insurer.

  Although this is sufficient for insurers to price cover for the vast majority of applicants, in some instances further medical evidence may be required because of:

  • Your age
  • The size of the benefit you’re requesting
  • Medical conditions/your state of health
  • Your BMI
  • Smoker status
  • Family history of hereditary illnesses
  • Any combination of the above.

  

  While most applications don’t need additional information, some will. It’s difficult to say whether or not additional medical evidence will be required because the thresholds differ from insurer to insurer. Some are more lenient than others and it will also depend on the applicant.

  Victoria Slade
  Independent Protection Expert at Drewberry

  GP Reports, Nurse Screenings and Medicals…

  The medical evidence an insurer might ask for could vary, from a simple GP report about your medical history all the way to a full blown medical.

  These medical screenings are entirely paid for by the insurer and are usually held in private clinics across the country – wherever is the most convenient for you.

  A step between requesting GP reports and an entire medical is a basic nurse’s screening. This involves a qualified nurse coming to your home or place of business and taking simple measurements such as height, weight and blood pressure.

  Life Insurance with Pre-Existing Conditions

  If you have a pre-existing condition which, in the insurer’s eyes, may increase the chance of you claiming on the policy the insurer will do one of two things:

  • Decline to offer cover
  • Offer cover but with a ‘loading’ on the baseline premium.

  The thresholds for requiring medical evidence and applying loading vary. That’s why it’s worth getting advice from the experts at Drewberry as we’re best-placed to know which insurers offer the best terms for pre-existing conditions.

  Can I Get Life Insurance Without a Medical?

  Yes, you can get Life Insurance with no medical screening. Over-50s Life Insurance which is a specific Whole of Life Insurance plan rarely requires a medical and is usually advertised as ‘guaranteed acceptance’.

  This is because providers understand the 100% likelihood of a claim providing the insured keeps paying the premiums, and so the cost of Whole of Life Insurance is priced accordingly.

  For other types of cover, it’s perfectly possible that you’ll need no medical checks for Life Insurance other than the questions initially asked on the application.

  This will be the case if you don’t trigger any of the insurer’s requirements for further medical evidence such as applying for a high benefit, a poor medical history, high BMI or a combination of these or any other conditions that prompt the need for a medical.

• Do I Need to Write My Life Insurance Into Trust?

  If you’ve gone to all the trouble of protecting your loved ones with Family Life Insurance, the last thing you want to think about is them being faced with a big Inheritance Tax bill after you’re gone.

  If you’ve gone to all the trouble of carefully calculating how much your loved ones will need then you don’t want anything to take cash out of your family’s hands.

  However, this may well happen if you haven’t taken steps to mitigate the inheritance tax on Life Insurance payouts that becomes due if your benefit is paid into your estate.

  While Life Insurance is free from income tax, if you pass away and the Life Insurance policy pays out to your estate it may be subject to inheritance tax at 40%.

  This bill must usually be paid before your family even gets access to your estate, which could cause significant financial hardship. Many people don’t realise this and could be in for a bit of a shock to receive such a big bill form HMRC at a difficult time.

  Beware Inheritance Tax on Family Income Benefit!

  While Family Income Benefit will be paid free from income tax, it will be treated as one lump sum for inheritance tax purposes.

  So even a relatively modest FIB benefit of £18,000 a year over 20 years would gross up to a £360,000 benefit overall – well in excess of the single person’s IHT nil-rate band threshold of £325,000.

  Your family may therefore have to find cash upfront to pay an inheritance tax bill on an income they may not receive until decades have passed.

  Inheritance Tax for Unmarried Couple with Life Insurance

  If you’re not married then the inheritance tax implications on any wealth you leave behind, including Life Insurance payouts, are even greater.

  While married couples can leave Life Insurance to each other usually IHT-free, there’s no such protection for cohabiting couples – you need to be married.

  With a rise in the number of families made up of unmarried couples named in each other’s Life Insurance, it’s rapidly becoming the case that the spousal exemption is available to fewer and fewer people.

  Avoid Inheritance Tax by Writing Life Insurance into Trust

  The way to ensure your Life Insurance is not paid into your estate and therefore removing the risk of it adding to any IHT liability you can opt to write your Life Insurance into trust.

  Then because the money is never paid to your estate it’s all free from inheritance tax when the trust distributes it to the beneficiaries.

  If you put your Life Insurance in trust, you may be able to avoid inheritance tax and stop your benefit being eaten up by the taxman.

  

  Putting your Life Insurance into trust is absolutely free and Drewberry’s experts can help you do this as part of the service. It’s not as complicated as it might sound – to get the trust set up we’ll just need few signatures on a couple of forms. Why not ask about advice on Life Insurance trusts today?

  Sam Barr-Worsfold
  Independent Protection Expert at Drewberry