A guide to UK life insurance

Life and critical illness insurance provide a nominated beneficiary with a tax-free lump sum if you die. There are several types of policy. So, it is important that you perform a lot of research and get quotes for life insurance. Just because a policy costs a bit more does not mean that it is right for your family.

Different types of UK life insurance

Level term
Provides a defined benefit if you die within the term of the agreement. The most common terms are
20 and 25 years. Decreasing term
As your level of indebtedness diminishes each year, so does the lump sum payment you will receive. Increasing term
Your beneficiary will receive a higher cash benefit to protect against rising inflation and expenses. Whole of life
Regardless of your age of death, your nominated beneficiary will receive a lump sum payment. Convertible
A level term policy allows the flexibility to be switched to whole of life at a later date.

Choosing the right life insurance policy for your family

Cost-based decision
Term insurance quotes are cheapest, especially if you select decreasing term. If you have a repayment mortgage or are slowly repaying your debt, you need less coverage to clear the balance next year than you do now. Family-based decision
Cheap insurances are particularly useful if you have a young family to protect and you are trying to survive on a fixed income. If you have more disposable income, you may wish to consider the future cost of education and childcare. Debt-based decision
It is hard enough trying to emotionally deal with the loss of a loved one, let alone cope with debt and credit problems. The bear minimum coverage that you require should be sufficient to pay off your mortgage and all of your debts. Tax avoidance
A whole life policy helps to minimise your inheritance tax bill, and is achieved by making payment outside of your estate. The cost is high, but this is because a separate investment plan needs to be established to cover the premiums during your later years. Seek financial advice
Before signing-up based on a simple term life quote, it is advisable to seek professional advice from an Independent Financial advisor (IFA). He will provide considerable advice and will trawl the market for the best life assurance policy for your needs. An IFA is not to be confused with a tied agent who can only recommend the policies of one company.