You choose the amount of cover and the number of years you want your cover for. The policy pays a fixed and guaranteed lump sum should the insured person die during the policy term.
The money paid from a claim on a level term insurance policy can be used for any purpose by the receiving beneficiary.
Critical illness cover can be added to the policy, this would produce a lump sum in the event of certain serious illnesses being diagnosed. The insured would not have to die for a claim to be made.
How it works
If you choose a level term insurance policy and die whilst the policy is active the sum assured will be paid. Payments are normally made into your estate and then paid out according to your will. In some situations it may be beneficial to place your policy in trust to avoid inheritance tax.
Premiums are normally paid monthly by direct debit. In some cases they can be paid annually.
How much cover should I have?
This is our most popular question by far and there isn’t a simple ‘one size fits all’ approach with life insurance. It will depend on many factors but here’s a few important points to consider:
- Do you have a mortgage? If you do what is the outstanding balance?
- If you have children how much would you need to leave to support them until they are financially independent?
- Do you have any other life insurance e.g. death in service etc?
- Do you have any other debts that would need to be paid?
- If you’re renting how would that rent be paid if you weren’t around. How long might your family need to rely on a life insurance payment for?
- A lump sum for your surviving spouse/partner? Losing a loved one is an extremely difficult and stressful time. Relieving the financial burden by leaving a lump sum could help enormously.
Your own financial and family situation will be unique but here’s a few examples of common cover our customers take out.
This is a young couple both aged 30 who have just purchased their first house. Both are in good health and are non-smokers. They are both in full time employment. The mortgage on the house is £220,000 payable over 25 years. They have a normal re-payment mortgage. They are on a very tight budget but want to ensure that if either of them dies the mortgage is paid off. They don’t have any children or any other substantial debts.
Option 1: The cheapest option for our first example couple would be a joint decreasing mortgage life insurance policy set at £220,000 cover over 25 years. This cover is designed to reduce as you pay off your mortgage. If either person dies the payment from the policy would be enough to pay off the mortgage. There wouldn’t be any cover left over after the mortgage had been paid off.
The monthly premium for this policy is cheapest with Legal & General at £8.94 per month. Price correct at 30th June 2017.
Option 2: A joint level term insurance policy for £220,000 cover over 25 years. The cover doesn’t reduce but our couples mortgage will as they re-pay it each month. This means in the event of a claim there would be enough money to pay off the mortgage plus some extra for the surviving partner. The amount left over would be dependent on the size of the remaining mortgage.
The monthly premium for this policy is cheapest with Legal & General at £11.38 per month. Price correct at 30th June 2017.
It’s really important to note that these are just examples and should not in anyway be taken as advice or guidance. Your own financial situation will be unique and your policy should be tailored to suit you.
Here we have another couple aged 40 both in good health and both non-smokers. They have two children, 2 and 4 years old. Currently only one of them is in full time employment and the other works part time. They have a £400,000 mortgage remaining but no other significant debts. They have a larger budget for their life insurance and would like a policy that pays off the mortgage if either of them dies and leaves the surviving partner enough money to bring up their children until they are no longer financially dependent on them.
Option 1: A level term insurance policy for £600,000 over 25 years. This would give enough cover to pay off the mortgage and leave a significant amount for the surviving partner and children.
The monthly premium for this policy is cheapest with Legal & General at £56.21 per month. This price is at 30th June 2017.
It’s really important to note that these are just examples and should not in anyway be taken as advice or guidance. You’ll notice we haven’t given any more examples here. That’s because as this couple has a larger budget for their life insurance there are many options available and it would be impossible to give examples of all those options here. They could ask for more cover, they may include some critical illness cover, or they might opt to have two single life policies where potentially two claims could be made if they both died. You can use our quote system to try out any amount of cover you would like, you can quote for single or joint policies and you can include some critical illness cover if you would like to see how that affects your premium.
Why use Moneyworld?
There are countless ways to buy life insurance these days. From comparison websites to supermarkets to pushy call centres, all looking to make some commission for arranging your life insurance. In most cases the cover you’re getting is the same regardless of where you buy it. The premium is dictated by the amount of commission the broker you’ve chosen is taking. The higher the commission, the higher the premium.
We work differently. Arrange your life insurance through us and we’ll give up all the commission to make your premium as low as it can be. All you pay is a one off fee of £25 if you decide to apply for a policy. And if for some reason your application isn’t accepted or you just choose not to complete the application you can have your £25 back in full no questions asked.
Get a quote today and see how much you could save.
If you’re unsure about any aspect of your life insurance we would always recommend you seek advice. We’re now working in partnership with Vita, an independent whole of market insurance broker that are able to offer this service. Vita shares our values, there’s no hard sell, no pushy sales people, just fair and honest advice tailored to your circumstances.
If you’d like further information please visit our advice page and complete the call back request form or call the number provided to speak to an adviser.