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Our guide takes you through what to expect from life insurance, from the application right the way through to the payout. If you think it’s a product that could help your loved ones, get a quote today.
Life insurance is less complex than it can seem at first glance. At base, it is an insurance policy that pays out an agreed cash lump sum to your nominated beneficiaries when you die. This could be used for any number of reasons: to help cover outstanding mortgage payments, to leave a financial legacy or to pay towards funeral arrangements or credit card payments.
But the details can seem daunting when you start digging around for quotes. So we’re demystifying the process. Here’s what to expect when buying life insurance.
There are broadly two types of life insurance: term life and whole life.
Term life policies cover you for a specific length of time and, if you die within the term of the policy and the policy remains valid, your loved ones will receive a payout. Whole life covers you for your whole life, however these policies tend to be for smaller amounts (typically with an upper limit of around £10,000).
Most people buy term life policies to cover a specific eventuality, like a mortgage repayment. For instance, you could have a term life policy in place until your mortgage is paid, meaning that if you were to die before reaching the end of your mortgage it would be covered.
Whole life policies tend to be over-50s policies, designed to cover smaller expenses. You might be worried about covering the cost of a funeral, for instance. Over-50s policies are often designed with this purpose in mind.
We’ve got guides about how to decide what type of policy may be right for you. If you opt for a term policy you’ll need to think about how much you want from your payout, how long you want the term to last and what you want it to cover.
Once you know what type of policy you want you can apply.
The application process for term life policies involves a questionnaire all about you. It’ll go through details such as your income and mortgage arrangements to get an idea of how much payout you’ll need. You’ll also have a health and lifestyle questionnaire designed to understand what kind of risk you pose to the insurer.
It’s crucial that you answer all questions honestly so that your policy remains valid for your beneficiaries to receive the intended payout. If you omit or change details about your health then any claim against your policy could be rejected.
The questionnaire will also be used to work out what your monthly premiums will be, and of course you can then decide whether or not you’d like the policy.
The application for over 50s life cover is different and usually more straighforward. As long as you meet the age criteria for applying you're guaranteed to be accepted and there's no medical required.
As with any insurance product, make sure you have read the policy documents and understand the extent of your cover before parting with any money. Life insurance is a long-term investment and so you need to know you’re making the right choice.
Your life insurance policy will charge monthly premiums. Keeping these up will mean that you don’t default and risk invalidating your policy.
You’re insured from the point at which the policy starts. As long as premiums continue to be paid, your policy will remain valid. If you fall chronically ill after taking out your policy, talk to your insurer as soon as possible, as part of your cover may be a critical illness benefit, helping you to manage your outgoings if you’re unable to work.
When you buy your policy, you may be offered the opportunity to buy optional add-ons too. These give you added levels of protection for specific events. For instance, critical illness cover usually pays some of your payout early if you become sick with one of the illnesses defined by the policy. This can help if your illness is causing a loss of income.
Whether you add these benefits to your policy is entirely up to you. Be sure to understand what you’re buying – for some insurers, you may have to add a benefit to your policy whereas for others the same benefit is included as standard. Finding this out should be a part of your research.
It’s not a nice thought, but life insurance policies end one of two ways: when the term runs out, or when you die.
Except in limited circumstances, your payout isn’t for you to use, but for those you leave behind. They can make a claim on your policy and the beneficiaries will receive the agreed amount.
When you’re taking out your policy, you’ll be thinking about what your loved ones’ living costs are at that moment in time. What would they need to continue to live the life they’re accustomed to? Those are, of course, important considerations.
But it’s also a good idea to think ahead to the future and how these costs could change. For instance, you might be paying for your children to do extra-curricular activities. If you were to die suddenly, some of your payout might be put towards their ability to continue. But in 20 years’ time, this situation is likely to have changed. Your outgoings could be very different – you might have retired, or you might want to ensure that part of your payout is ringfenced for your partner’s care as they age.
So consider what life might be like at the end of the policy to give your loved ones peace of mind.
We’ve got a range of life insurance products, and there are numerous others available on the market. It’s a long-term investment, so take your time to do thorough research and be satisfied that the policy you’re buying meets your individual needs.
If you need a little extra help, you can always pop into a Post Office branch and speak to our colleagues there. While they can’t offer advice on what the right product is for you, they can talk you through the products we offer and point out features that you might not be aware of. And it’s always nice to see a friendly face. Or you can give us a call to talk through your needs and buy a policy if you think it’s right for you.
Having life insurance can give you peace of mind and help make sure your loved ones are financially secure when you're gone.
Our easy-to-follow guide to the different types of life insurance may help you decide which type of cover is right insurance for you.
Life insurance and life assurance are different things, so make sure you have all the information you need on which may be most appropriate for you.
