Life insurance policies are designed to provide financial security for dependants of a policy holder in the event of an early death. Most policies are taken out to cover a mortgage and can pay out either a lump sum or a set monthly amount.
What are the different types of life insurance?
There are 3 types of life insurance:
1. Term Insurance
This is the simplest kind of life insurance. It has a set term, usually 10 or 20 years and pays an agreed lump sum upon the death of the policy holder. If you live longer than the term of the policy it does not pay anything. If you have a renewable policy then there is the option to continue the product after the end date without a review of your health.
2. Mortgage Term Assurance
This is very similar to life insurance and underwriters use the same information to assess risk. The policy is designed to provide financial security by paying off the remainder of the mortgage of the policy holder. It is officially called Mortgage Decreasing Term Assurance; as the mortgage decreases, so does the sum assured. Endowment Mortgage holders usually have this product included as a way of covering the lender.
3. Whole of Life Policy
This has no fixed term and providing all premiums are up to date, will pay out upon the death of the policy holder.
What is the difference between insurance and assurance?
In general terms, insurance covers an event that might happen, whereas assurance covers an event that will happen. That is why cover for your car is called insurance. A car accident is something that might happen, but life assurance will only pay out upon the death of the policy holder which is ultimately a certainty.
How do I find the best price when buying life insurance?
There are many different factors that will affect the price (the premium) you pay for your insurance policy. These include, amongst others: your health, occupation, the amount the policy will pay out and the length of time the policy lasts. Most people will purchase their policy through an Independent Financial Adviser (IFA) who is best placed to know the market and find the right product for you. Comparing different insurance products will help you to find the best price, but remember, the cheapest may not always be the best policy for you.
Can I still get life insurance if I have a pre-existing condition?
Life insurance companies and underwriters need to know what they are covering and if you are taking out a policy in excess of £250,000, they may ask for further information from your GP, or even want you to undergo a medical examination. This is standard practice and allows the insurer to correctly set your premiums. You can request a copy of the report your GP sends to the company; however, this can sometimes delay your policy. If you have a long-term medical condition, you may wish to provide details of your medical specialist too. This may help to speed up your application.
- It is vital that you are honest and upfront about any pre-existing medical conditions you may have.
- Remember, insurers are allowed to ask for details of your family history.
- Try to answer the questions as accurately as possible in order to minimise any problems should a claim arise.
- Always check your policy documents.
There are relatively few insurance companies specialising in insuring people with pre-existing medical conditions. The best way of identifying which company is likely to offer the best terms is to find an experienced Independent Financial Adviser (IFA). Further information on finding a specialist insurance broker can be found on the back of this leaflet.
Do I need to tell my insurer about my genetic test results?
In 2001, the UK Government responded to growing concerns surrounding the use of genetic test results in assessing Life Insurance applications by restricting the use of predictive genetic test results in relation to insurance. The Association of British Insurers (ABI) created a Moratorium and Concordat, which in October 2018 was replaced by the Code on Genetic Testing and Insurance.