Client Login
Life Insurance can provide a cash lump sum to support your dependents when you die. How much this will be, who it will go to and how long the term of the policy is will depend on your individual circumstances.
Why do I need Life Insurance?
Life Insurance is designed to provide cash quickly after death, and can replace the earnings your dependents have come to rely on. It can take time to settle a Will (especially if your estate is subject to probate) but funds released from Life Insurance can be used however your dependents wish. For example:
- To help pay for your funeral
- For daily living expenses
- To pay off a mortgage or other debts
- To save for university or invest for the future
If you do not have children, or other dependents who rely on your earnings, you may not need Life Insurance. The amount of cover you need will likely depend on your answers to the following:
- How many dependents rely on you for living expenses?
- In the event of your death, how would your dependents lives change? Would your family need to leave their home?
- How long would it take for them to become self-sufficient?
-
Andrea’s multiple insurance deal headache
Andrea had always sourced cheap insurance deals online for mortgage cover, Life Insurance and family protection. After managing her protection in this way, Andrea wasn’t sure what her options were, or what she was protected against. Andrea came to Wren Sterling to better understand her policies, how they worked together, and find out if she was getting the best deal.
We reviewed Andrea’s protection arrangements and placed them in Trust. Now, after her death, the benefits from any policies will go to her Trustees, without waiting for her estate to be valued. This means that this money will be available to pay for any funeral arrangements or unexpected costs, without increasing her inheritance tax bill.
*Inheritance tax may still be due if an individual has been named as a beneficiary within 7 years of death, other than a spouse or partner, due to gifting rules.
How does Life Insurance work?
Life Insurance is an agreement between you and the Life Insurance company. You agree to pay them an amount (usually monthly) for a set period of time, and the insurer agrees to pay your beneficiaries an amount of money if you die within the set time.
Different insurance providers offer different rates, so it can pay to shop around. There are two different types of life insurance, term life insurance and whole of life insurance.
Term Insurance – This type of insurance covers a pre-agreed length of time. If you die during this period, it will pay out depending on the sum assured on the policy. Exclusions may apply.
-
- Level cover – Offer a fixed cash sum upon the death of the assured.
- Decreasing cover – Offers a cash sum upon the death of the assured – however the amount offered will decreased over time, designed to cover the assured where they have debts (such as a mortgage*) in the event of death before the end of the term.
Whole of Life Cover – These policies provide cover for the entire duration of the policy holder’s life – as long as you keep up with the monthly premiums. As such, these policies are often more expensive than other term policies. These can be investment-linked or purely insurance-based.
What about Critical Illness cover?
Life insurance will not pay out if you’re unable to work due to illness or injury. Critical Illness cover is designed to pay out if you are diagnosed with a specified critical illness detailed within the policy schedule.
If you’re thinking about life insurance and Critical Illness Cover, it could be worth considering Combined Cover – which can be cheaper.