FAQs: Life insurance
What is life insurance?
Life insurance is a form of insurance which provides a pay-out only if you die.
Do I need it?
This is dependent on individual circumstances; consider whether you have anyone who depends on you financially and how they would cope if you weren’t around. You may be advised to consider a life insurance policy when committing to a mortgage, as this expense can be a heavy burden for anyone who is left to cover the mortgage payments should you pass away.
How much cover do I need?
Again this is down to personal circumstances. Consider your outstanding debts, how many people depend on you financially, and what exactly you want to cover with your policy. Look at our guide for choosing the right policy (page link for Life Insurance – choosing a policy).
What happens if I stop paying my premiums?
If you stop paying your premiums, then the policy will lapse and you’ll no longer be covered by a life insurance policy. If you miss a payment due to moving banks or accidently cancelling the direct debit the policy may not be cancelled immediately, the insurance company will contact you for your new bank details.
Can I alter my policy after it has started?
In most cases it’s not possible to make changes to your policy once it has begun. However, some insurers may let you increase your cover if there are a change in circumstances such as moving to a new house with a larger mortgage, salary increase or you get married.
Tax rules for life insurance claims
Under the current tax rules, in most cases you are not required to pay income or capital gains tax on pay outs for critical illness, terminal illness and death. However, your pay out may be liable for inheritance tax in some circumstances.
Is there anything that could stop my policy paying out?
Your policy may have some exclusions which will vary depending on which policy you have taken out e.g. if you were to die to alcohol or drug abuse or suicide. It is always best to check these details very carefully before taking out a policy, and to be as honest as possible when filling in the application to ensure you are presenting your state of health as accurately as possible.
Will I be able to get my money if I don’t die before the end of the policy?
No, you can’t get any of the money back, you simply stop making your payments.
How much will it cost?
You can find life insurance for as little as £5 a month, however the amount you pay is dependent on your personal needs and circumstances such as age, health and how much cover you want.