Life Insurance UK
There are many different types of life insurance available and all the different terms can be confusing.
Here is a brief explanation of the main types of life cover available in the UK, to help you decide what cover is best for you:
Level term life insurance
Level term life insurance provides a level of cover that remains the same for the life of your policy. When you take out the policy, you must decide what level of cover you need and how many years you want the policy for.
You can opt for either a single policy as an individual or a joint policy with your spouse or partner.
The policy would pay out the sum insured upon the death of either policyholder.
Decreasing term life insurance
Decreasing term life insurance provides a level of cover that decreases each year over the term of the policy.
This type of life insurance is commonly used as a basis for mortgage protection life insurance.
Mortgage protection life insurance
As explained above, mortgage protection insurance is a decreasing term insurance - where the sum insured reduces with each year.
The reason for this is that mortgage repayments decrease each year, so the level of cover you require will also reduce.
In the event of a policyholder's death, mortgage protection insurance will ensure that their house is fully paid for.
Convertible term life insurance
A convertible term life insurance policy gives you the option, at the end of your initial life insurance term, to convert to an endowment policy for an extra cost.
This is particularly useful if you contract an illness during the life of your initial policy - you will still be entitled to convert to a permanent endowment policy at the end of your initial term.
Renewable term life insurance
A renewable term life insurance policy is based on a shorter term than a standard life insurance policy, where you can choose to renew your policy or not at the end of each term. You will be entitled to renew your policy regardless of any changes to your health.
Increasing term life insurance
An increasing term life insurance policy gives you the option to increase the sum of your cover each year by a certain amount or percentage. This type of cover is restricted to those under 65 and you may need to provide evidence of good health to increase your cover or sometimes evidence of a work promotion, marriage or starting a family will suffice.
Critical illness cover
Critical illness cover can be added to most term life insurance policies for an extra premium.
This means that life insurance is payable in the event of a critical illness, as well as a death.
Income protection insurance
Income protection insurance offers cover if you are left unable to work due to an accident or illness. Whilst life insurance pays out a lump sum upon your death and mortgage protection insurance pays off your house, income protection insurance will provide ongoing support to you and your family, should you be unable to work.
The amount payable will usually be around 50-65% of your monthly income and this monthly payment will be tax-free.
