An Overview of the UK Life Insurance Market

Life insurance is an insurance which pays out a specific sum of money upon your death or after a certain period of time. In the United Kingdom you have several different types of insurance plans that pay out after your death or after a specific period of time. In order to understand which policy would benefit you the most it is imperative that you learn what they are.

You have two main categories of life insurance: life assurance and whole-of-life. Life assurance is the most affordable and simplest policy available to UK residents. It is also known as term insurance. This insurance product covers you only for the set period stated in the contract, which could be 12 months. As long as you die within the 12 months you have the policy your beneficiaries will receive a lump sum. If you do not die during this specified period the policy will not pay out. The premiums are also not returned. There are different types of term insurance that will be overviewed below.

Term Assurance

There are three types of policies found under the most basic of insurance policies: level, decreasing, and family income.

Level Term is a policy that gives your family a lump sum if you die within the cover period. You can pay on a monthly or annual basis. The amount you pay is set for the period of cover, which is usually 12 months. However, there are some term policies that will last ten years. It just depends on the provider and how much you wish to pay out for the policy.

With a level term policy you know exactly what your family will obtain in a payout. You can set the payout based on the affordability of the policy; however, it is a better idea to have the payout amount cover your mortgage, other debts, and funeral costs. If you can afford it you may wish to have enough life insurance to cover all your debts and a year or more of your income. This is especially important if you are the person bringing in most of the income for your family’s monthly expenses.

Decreasing term policies are exactly as they sound in that you do not have a fixed lump sum payout, but one that decreases over time. This is typically set for those major debts like mortgage repayments. As your mortgage gets paid off it reduces in size. As your decreasing term policy reduces in size you also obtain a cheaper premium. This means it can be more affordable than level term insurance since you will need less money in the end.

Family income policies are a decreasing term policy specific for income needs. Your beneficiaries do not receive a lump sum payout at your death. Instead, there is an account set up for income in which your family receives a certain amount each month. Your family could receive up to £2,000 a month with this policy. It can be taken out for 20 years. There are limitations such as dying two years into the policy, where your family gets 18 years of cover, but if you die a year before the policy ends your family only receives money for one year.

Whole-of-life Policies

This type of life insurance is much different than the term assurance policies discussed above in that you obtain it for life. The policy goes on without ending unless you decide to cancel it, default on your payments, or die. At your death there is a guaranteed payout in a lump sum. Unfortunately, these policies are more expensive because you have them for your life and they are guaranteed to pay out when you die. There is no specific term you have to meet.

It is easiest for you to compare these various policies before you make a decision on which one is best for you and your family. You can compare life insurance policies online with the help of comparison websites. A comparison website explains the policies, shows you the terms and conditions, limitations, and the typical costs of the plans. You can also request quotes from a variety of companies to ensure you receive the best quote for the policy that is best for you and your family.