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Learn how life insurance works, how much cover you may need, the different types available and what affects the cost. Get expert life insurance advice from Hello Mortgage.
Life insurance can provide a lump sum to your chosen beneficiaries if you die during the policy term. It can help protect your family from financial pressures such as mortgage repayments, household bills and other debts.
Life insurance is a type of policy which pays out a lump sum when you die subject to the policy terms and conditions. There are several different types of policy available, and the right one for you will depend on your individual circumstances. At Hello Mortgage a specialist Protection Advisor is always on hand to ensure you get the best product to suit your needs.
Life insurance is generally straightforward.
You choose the amount of cover you want and the length of time you want the policy to run. The insurer will usually ask questions about your age, health, lifestyle and circumstances when assessing your application.
You then pay your premium, usually monthly.
If you die during the policy term and the claim meets the policy conditions, the insurer pays the agreed amount to your beneficiaries.
For example, if you had £300,000 of life cover over 25 years and died during the policy term, the policy could pay £300,000, subject to the terms and conditions of the policy.
The amount paid depends on the type of policy you choose.
The right amount of life insurance depends on your circumstances.
A useful starting point is to consider:
Mortgage + debts + future family costs − savings and other suitable resources = potential protection need
This is only a starting point, rather than a calculation that will be appropriate for everyone.
You should consider how much your family would need if your income disappeared. If you have children, you may also want to think about childcare and education costs.
For homeowners, the outstanding mortgage is often one of the biggest financial commitments to consider.
A protection adviser can help you assess your needs and decide how much cover may be appropriate.
There isn't a standard price for life insurance because premiums depend on the individual and the policy.
Factors that can affect the cost include:
Generally, taking out cover when you are younger can mean lower premiums, although the cost will depend on your individual circumstances.
It's important not to choose a policy based solely on price. The cheapest policy isn't necessarily the one that provides the most appropriate protection for your needs.
There are several types of life insurance. The most appropriate option depends on your financial commitments and what you want the policy to achieve.
With level term life insurance, the amount of cover stays the same throughout the policy term.
For example, if you take out £250,000 of cover over 25 years, the insured amount remains £250,000 throughout the term, subject to the policy terms.
Level term cover can be suitable if you want to leave a fixed amount of money to your family or have an interest-only mortgage where the capital doesn't reduce.
With decreasing term life insurance, the amount of cover reduces during the policy term.
This type of cover is commonly considered alongside a repayment mortgage because the mortgage balance generally reduces over time.
If you are primarily looking to protect your mortgage, decreasing term cover may therefore be an option worth considering.
Whole of life insurance is designed to provide cover for the rest of your life, subject to the policy terms and premiums being maintained.
Unlike term insurance, it isn't designed to end after a fixed number of years.
Whole of life policies can be more expensive because they are designed to provide cover for your lifetime.
If you have a mortgage, it's worth considering what would happen to the mortgage if you died.
Would your partner or family be able to continue making the repayments?
Life insurance could provide a lump sum that may be used to repay some or all of the outstanding mortgage, depending on the amount of cover and the policy selected.
For a repayment mortgage, decreasing term insurance can sometimes be considered because the amount of cover reduces broadly in line with the mortgage balance.
For an interest-only mortgage, level term cover may be more appropriate because the amount owed may not reduce during the mortgage term.
The right option depends on your circumstances, so it's important to consider your mortgage and wider financial needs together.
Life insurance and critical illness cover protect against different events.
Life insurance can pay a benefit if you die during the policy term, subject to the policy conditions.
Critical illness cover can pay a lump sum if you are diagnosed with one of the specific illnesses covered by the policy and meet the relevant definition and conditions.
Some people choose to have both types of protection because they address different financial risks.
For example, life insurance can help protect your family if you die, while critical illness cover could provide financial support if you survive a serious illness but are unable to work or face additional costs.
Some employers provide death-in-service benefits as part of their employee benefits package.
This can provide valuable protection, but it may not be enough to meet your family's needs.
It's also important to understand what happens to the benefit if you leave your employer.
If you rely entirely on an employer's death-in-service benefit, changing jobs could change the protection available to your family.
For this reason, it's worth considering your workplace benefits alongside any personal life insurance rather than automatically treating one as a replacement for the other.
Having a medical condition does not automatically mean you cannot get life insurance.
The insurer may ask questions about your health and medical history when assessing your application. Depending on your circumstances, this can affect the premium, terms or availability of cover.
It's important to answer health and lifestyle questions accurately.
If you have a medical condition or a more complicated health history, speaking to a protection adviser may help you understand what options are available.
A life insurance policy can potentially be placed in trust.
A trust can change how the policy proceeds are dealt with and who controls them. It can also help the money reach the intended beneficiaries outside the estate in certain circumstances.
However, the tax and legal consequences depend on the individual circumstances and type of arrangement.
For that reason, you should not assume that putting a policy in trust will automatically make the proceeds free from inheritance tax. Appropriate legal or tax advice may be required.
Tell us a bit about yourself and what you're looking for. It takes a few minutes, won't affect your credit score, and there's no obligation to proceed.
We'll match you with lenders who consider your circumstances, even with a less-than-perfect credit history, so you know where you stand before applying.
Once you're matched with the right lender, we'll guide you through the application and stay with you right through to completion.
Choosing life insurance isn't simply about finding the cheapest premium. You need to consider the amount of cover, policy term, type of policy, mortgage and wider financial commitments.
At Hello Mortgage, our protection advisers can help you understand your options and find suitable cover based on your circumstances.
1. Tell us about your circumstances
We'll ask about your mortgage, family, income, financial commitments and existing protection.
2. Understand your protection needs
We'll help you consider how much cover you may need and which type of policy could be suitable.
3. Compare suitable options
We'll compare available options based on your circumstances and explain the key differences.
4. Apply for your chosen policy
Once you've decided which option is right for you, we'll guide you through the application process.
5. Review your protection
Your circumstances can change, so it's worth reviewing your protection when you move home, have children, change your mortgage or experience another significant life event.
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Life insurance is about more than protecting a mortgage. It's about making sure the people who depend on you have financial support if the worst happens.
If you're unsure how much cover you need or which type of life insurance could be suitable, speak to Hello Mortgage for a free, no-obligation conversation about your protection needs.
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Life insurance isn't generally a legal requirement for having a mortgage. However, it can be worth considering what would happen to your mortgage if you died and whether your family could continue making the repayments.
The amount you need depends on your financial commitments and who relies on you. Your mortgage, debts, income, savings and future family costs are all factors worth considering.
The cost varies depending on factors such as your age, health, lifestyle, smoking status, the amount of cover and the policy term. There is no standard price that applies to everyone.
Level term life insurance keeps the amount of cover broadly the same throughout the policy term. Decreasing term life insurance reduces the amount of cover over time and is commonly considered for protecting a repayment mortgage.
