Life Insurance pays out on your death, offering a cash lump sum to your loved ones to help see them through any financial bumps in the road your absence causes.
Common uses for Life Insurance include protecting outstanding mortgages or other debts, covering funeral costs, leaving a lump sum legacy for loved ones or simply replacing your income.
You can use Life Insurance however you see fit, allowing you to choose the best option for your family.
Opt to include Critical Illness Cover to protect against the risks of illnesses such as heart attack, cancer and stroke.
In most cases, commercial pilots won’t have trouble obtaining Life Insurance. Of course, this will be subject to your medical history and the level of risk you present to the insurer, but for the most part those flying commercially for airlines such as British Airways, Virgin, easyJet etc. won’t have much preventing them from getting cover.
Helicopter pilots can sometimes have more difficulty obtaining Life Insurance depending on the nature of your work. Riskier helicopter pilot jobs such as providing transport to oil rigs or flying for the military could make it trickier to get Life Insurance.
This said, Drewberry has placed risk for hundreds of pilots over the years and has had a great deal of success in matching pilots with Life Insurance, so it always pays to have a conversation about cover regardless of how, when and what you fly.
There are several types of Life Insurance for you to consider as a pilot, such as:
While not something anyone wants to think about, and while the risk of death is fortunately low for the average healthy adult in the UK, the reality is that tragedy could strike when you least expect it and so having protection can be incredibly valuable should the worst happen.
While death may not be likely today or tomorrow, especially as a pilot who needs to be in top shape to pass all the physicals required to retain their licence, the point of most Life Insurance policies is to protect you for the long run e.g. over the term of a mortgage.
It’s here that the risk of death starts to get larger when you consider it over the longer term.
The risk of death for a healthy, 30-year-old man over the next 10 years is 1 in 85. However, when you extend this period to 25 years, which is around the typical length for a mortgage, the risk rises to 1 in 18.
Life Insurance tends to be one of the least expensive insurances on the market, especially if you’re young and healthy. Given this, if you have a family and liabilities such as a mortgage, it tends to make sense to take out Life Insurance as soon as possible rather than delaying until you’re older or have unfortunately developed a health condition that could push up premiums.
It’s difficult to put a figure on how much Life Insurance costs for pilots because each individual is different and will have different policy factors and personal needs from their Life Insurance, all of which will impact the price.
In the table below, we’ve outlined the cost of Life Insurance for a pilot of three different ages, wanting £250,000 of cover for 25 years on a level and on a decreasing term basis.
To get these quotes, we’ve assumed:
As you can see, pilots Life Insurance can be obtained pretty inexpensively if desired, with premiums starting at less than £10 a month for a healthy, non-smoking, 25-year-old pilot. For personalised quotes applicable to your situation, please don’t hesitate to get in touch for fee-free advice.
While Life Insurance provides protection if you were to pass away during the term of the policy, you may want to consider what would happen if you developed a critical illness as well.
Adding Critical Illness Insurance to your policy will provide a payout should you suffer a critical illness specified by the insurer. The most common claims on such policies are for cancer, heart attacks and strokes, although conditions such as multiple sclerosis, Parkinson’s disease and loss of limbs also tend to be included.
As you’re more likely to become ill than you are to pass away, the cost of Life Insurance with added Critical Illness Cover is significantly more than Life Insurance on its own. You may therefore choose to have the Critical Illness Insurance pay out a lesser amount than the full Life Insurance benefit to keep costs low.
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 Pilots Income Protection alongside Life Insurance rather than adding Critical Illness Cover.
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 tends to be seen as more comprehensive than Critical Illness Insurance because it pays out for anything that medically prevents you from working, rather than just an illness of a specified severity.
Some people prefer to index-link Life Insurance so that their 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.
If the benefit is for family protection, then rising prices (inflation) means that the basket of goods and services your payout could buy in the future may be smaller than today, not leaving your loved ones with enough to maintain their standard of living if you passed away in the future.
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.
With Life Insurance you can choose to either guarantee your premiums so that they stay fixed (unless you’ve indexed them, in which case premiums will rise each year along with your benefit rising with inflation).
The alternative is reviewable premiums. As the insurer can adjust these each year as they see fit, the issue becomes that you never know how much your 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.
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:
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.
Additional information required may include a GP report, a nurse’s screening or a full-blown medical with a doctor, which will all be paid for by the insurer and held at your convenience.
Not everyone needs a medical for Life Insurance, so it’s perfectly possible to get Life Insurance with no medical screening.
Especially if you’re young, the benefit you’re applying for is modest and you don’t have any health conditions then it’s entirely reasonable that you could take out cover without ever needing a medical examination.
For pilots Life Insurance, this might be especially the case given that you have to be in the best shape possible to pass regular physicals to ensure you remain fit to fly.
If, however, you’re a little older and are applying for a higher benefit, you may find that the insurer requests further medical evidence from you. This could take the form of a GP report, a nurse’s screening or a full blown medical with a doctor depending on what comes up in the application.l
For most people, buying Life Insurance can be like buying peace of mind. You know that your loved ones will be taken care of no matter what happens to you.
However, what many people don’t realise is that the payout from a Pilots Life Insurance policy may be subject to inheritance tax, which could take a 40% bite out of any legacy you leave for your loved ones.
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, but inheritance tax could do just this.
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.
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.
The best way to avoid inheritance tax on Life Insurance is to write the policy into trust from the outset.
This involves the payout going into a legally separate entity (the trust) from your estate, so it never counts towards your inheritance tax bill. The trustees (those people you’ve entrusted to distribute the funds should you pass away) then pass on the benefit to your loved ones from the trust, sidestepping any inheritance tax burden on the payout.
Although this may sound complicated, it’s free of charge and Drewberry’s advisers help our clients with this every day and are more than happy to walk you through the steps required to ensure your loved ones receive every penny they deserve.
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 global insurance giant, operating in more than 170 countries. It employs around 55,000 employees worldwide, including 4,500 in the UK.
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