Published by Joe Davine on
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How to get covered for the rest of your life

If you’re looking for a policy to cover you for your whole life, and to help you support your loved ones financially after you pass away, it’s worth considering taking out a life assurance plan. We’ll guide you through the ins and outs of life assurance to explain what it is, who’s eligible, and to help you decide if this is the right policy for you. So, let’s get started.

What is life assurance?

It is a type of policy which provides lifelong coverage, and pays out to your loved ones when you die. Premiums are paid in set monthly instalments, and your death benefit is guaranteed - it will never decrease or expire so long as you keep up with the premium payments.

Often these policies have an element of investment to them. Similar to a pension scheme, with these policies when you take out a policy and pay in your monthly premiums, a portion of your payment is invested. As a result of this, you can build up a cash value which can either be left in the policy or withdrawn while you’re alive. Therefore, the death benefit payout when you die will depend partly on how well the investment part of your policy has performed over the years.

Who is eligible?

Any UK citizen or permanent resident between the ages of 18 and 65-85 (depending on the provider) can take out a life assurance policy, however it is more beneficial to some people than others. It’s worth not only considering if you are eligible, but also if it’s the right type of policy for you.

If you’re in old age or poor health, the cost of the premiums may mean taking out a life assurance policy isn’t worthwhile financially. You also won’t be eligible for a assurance policy if you have been diagnosed with a terminal illness such as cancer.

What are the pros and cons of life assurance policies?

Pros

  • It offers you lifetime cover that won’t expire.
  • It has an investment element that increases the value of your policy over time.
  • If you have any dependants that will need your support throughout their whole lives, a life assurance policy is guaranteed to offer support for them after you’re gone.
  • You can use an assurance policy to leave your loved ones a tax-free gift.

Cons

  • It is more expensive than term life insurance cover.
  • It’s less suitable for people with no dependents.
  • You could end up making payments into your old age, and possibly end up paying more in than is paid out. While most life assurance policies have an age where you no longer have to pay premiums, this age is usually around 90 years old.

How is life assurance different to term life insurance?

Term life insurance differs from life assurance, as it covers you in case you die within a specific period of time. Life assurance on the other hand, is a life long policy which provides you with coverage until death, for higher monthly payments- unless you fail to pay premiums, or you provide untruthful answers. Any policy that’s described as a ‘whole of life’ policy is just another way of saying life assurance.

And what about universal life insurance?

Another insurance option is universal life insurance, also known as ‘adjustable life insurance’. This is a more flexible style of policy than most whole of life plans; rather than having a single locked premium rate for the whole policy length, universal life insurance allows you to reduce or increase the death benefit and the premiums of your policy, even after you have paid the first premium.

With a universal life insurance policy, you can also adjust the frequency of your payments, and either increase the value of your policy or lower your coverage without surrendering the policy. However these adjustments usually result in lower interest rates and higher surrender charges.

How much does a life assurance policy usually cost?

The price of your monthly premium typically starts from around £10. Even though you’ll often see policies advertised from in the region of £5, this unlikely if you’re looking for decent coverage from a reputable coverage.

However, it’s not possible to give a completely accurate estimation of how much a whole of life policy will cost you, as the quote provided to you will be entirely dependent on your own circumstances. You’ll be set a fixed monthly premium before your policy begins, and if you agree, you’ll pay into the policy every month until you reach a set age (somewhere between 65 - 85).

Any figures you can find online which generalise the cost of a level term life insurance policy will be extremely inaccurate; it’s only once you apply for the policy and supply your personal information that you’ll get a reliable quote.

For example say you are a non-smoker in their thirties, with a typical direct insurer you could expect to pay around £9 per month. Whereas, if you’re a smoker in their forties, you could potentially pay over £50 per month for the same level term policy.

Factors which can affect your premiums include:

  • Your age.
  • Your location.
  • The amount of cover you’re looking for.
  • Your medical history.
  • Your family’s medical history.
  • Your lifestyle.

How much coverage does life assurance offer?

The answer to this question completely depends on the policy you take out. It’s not possible to give you an accurate estimation of how much cover a life assurance policy will offer, as the coverage provided will depend largely on the provider. If you’re looking for coverage in the millions, you can find it but this will cost you considerable monthly premiums. The majority of people take out policies with around £100,000 - £250,000 worth of coverage.

When deciding on a life assurance policy, we recommend you first decide the amount of cover you would like to have, then compare different companies’ premium rates for policies catering to someone of your age and lifestyle. The right policy for you will depend on your needs and financial circumstances.

Is the payout tax-free?

Your life assurance payout could be subject to inheritance tax if your the value of your estate (including your policy’s death benefit) is over £325,000. In this case you will pay 40% of everything you leave behind above £325,000.

However, you can avoid this fee by writing your whole of life payout into a trust. For more information, see our helpful guide to everything you need to know about your life insurance tax options.

Can I cash out my life assurance policy early?

Yes. With many life assurance policies there’s an investment element included in the policy; this means you can build up a cash value from your invested premiums, and withdraw them while you’re still alive without surrendering your policy. It’s important to note that the amount you’re likely to receive is entirely dependent on how the investment has performed, and is not guaranteed.

You can also cash in the entirety of your whole of life (life assurance) policy by cancelling it. If you choose to do this your coverage will end, and you’ll receive a check for the whole cash value balance. In this instance you will have to pay for early termination of the policy; you may lose certain bonuses or guarantees, and you will have to pay tax on the amount withdrawn.

Is life assurance the right cover for me?

It depends on your needs and financial circumstances. By choosing a whole of life (life assurance) policy, you’re making sure your loved ones are always covered for entire the duration of your lifetime. Life assurance can help with funeral costs, paying off any existing bills, or simply maintaining your family’s standard of living after you’ve passed away.

The premiums for whole of life are more expensive than the monthly payments for life insurance, but your loved ones are guaranteed a payout once you die.

How can I get covered now?

This one's easy: we can help you. We’ve reviewed the best life insurance policies and providers, to help you find one that suits your needs. Have a read through all the information we’ve laid out in our reviews so you know all the details and get the best possible policy.

If you’re ready to get started and want to find a policy fast, click the button below to get a free life assurance quote.