Here are answers to some of the questions customers frequently ask us about life insurance.
It is not compulsory, but it is something you should consider carefully. If you
were unable to keep up your mortgage payments for whatever reason, your mortgage
lender has the right to sell your home and take the proceeds. A life insurance policy
to cover your mortgage will give you the peace of mind that, if you die, your family
can clear the debt and avoid the risk of losing the family home.
A mortgage is not the only thing in people’s lives that needs protecting. You should
consider all aspects of your finances whether you have a mortgage or not and it
is a good idea to regularly review the cover you have. Everyone’s needs and priorities
are different but you might want to consider protecting your income should you be
unable to work or are made redundant – you may also want to look at provision for
your family should the worst happen. The important thing is not over insuring, but
making sure that you are insured for the right things in the right way.
Both policies provide a tax-free lump sum, but whilst life insurance will pay out
should you die, a critical illness policy will pay out if you are diagnosed with
a critical illness, regardless of how that illness develops. In both cases, the
money can be used for whatever you like; it could be used to pay off your mortgage
or other debts, to replace lost income, or to pay for private medical treatments.
See our summary of how the different types of life insurance work.
There is no set rule that says how much you should have – it really comes down to
your circumstances and your budget. If you have a mortgage and a family, your needs
will be very different to those of a single person who rents, but each person should
consider protection of some sort, whether it’s for clearing debts, replacing income
or looking after family. We recommend that you speak to one of our expert advisers
for some free advice – they can make sure you have the right sort of cover to suit
you. Try our life insurance calculator for a rough guide of how much cover you might
Term assurance policies do not have a surrender value or impose penalties for cancellation.
They will provide you with the cover set out under the terms of the policy, so long
as you pay the premiums – if you stop paying the premiums, the cover will stop too.
If you are thinking of changing policies, make sure you are not reducing the quality
of your cover – check that any new policy gives you the same amount of cover for
the same period of time. Are the premiums guaranteed? If it’s a critical illness
policy, are you covered for the same range of illnesses? If you are in doubt, speak
to an adviser. If all that looks ok, then you can certainly switch to a cheaper
policy, but make sure that you never cancel an existing policy before the new one
is up and running.
Critical illness policies are a lot more complex than life insurance, as there are
certain illnesses that are covered and some that aren’t. There are two main reasons
why a critical illness policy would not pay out: firstly the claim does not meet
the insurer’s criteria and secondly, information given by the customer when they
applied for the policy was inaccurate or incomplete. At L&C we are very aware
of this issue and want to make sure that our clients can feel confident in the cover
they take out through us. We regularly review the claims history, service and illness
definitions of the major life insurance companies to ensure that you get the best
cover. We also give you the opportunity to complete your application over the phone,
so as long as you are open and honest, we’ll make sure that all the information
is accurate and complete.
Previous medical problems may well have an impact and what cover you can get and
at what cost, but it is certainly something we can research further for you. Life
insurance companies will typically charge higher premiums to people with certain
illnesses or conditions, but how much they charge and for what can vary considerably,
so it is always worth making sure you are with the right insurer for you. If this
is something you would like help with, please give one of our life insurance advisers
a call on 0800 073 1932.
It is never a good idea to delay these things, when you have established you have
a need for protection, the best thing to do is to get the cover in place as soon
as possible as you never know what is around the corner. Insuring yourself is not
like insuring your home or car, it is not generally instantaneous, and particularly
in the case of critical illness can require GP reports and thorough underwriting,
all of which takes time. If you need cover for a set date, like the start of the
mortgage or the birth of a child, it is a good idea to make sure it is underwritten
as soon as possible, in most cases if it does get underwritten more quickly it can
simply sit and wait until you choose to put it in force.
We believe that taking out life insurance should be as painless as possible, so
we aim to do the leg work for you. We'll compare life insurance policies from a
range of insurers on your behalf and instead you filling in a long application form
on your own, we’ll take care of it over the phone. There may well be the need for
further information later on, but we will be on hand to help and to answer any queries
you may have to make it as smooth a process as possible.