Getting the right life insurance policy depends on how much money your dependants need in the event of your death, how long you need cover for and how you want the money to be paid. This guide will help you understand the differences between policies and how they work so you can confidently choose a policy that accommodates your individual needs.
How long do you need to be covered for?
Until you die
If you want to be covered until you die, you should consider a whole of life insurance policy. This type of policy pays out when you die, no matter how old you are or how long you’ve had the policy for.
Whilst you pay off a long term debt
Decreasing term life insurance policies are designed to run alongside any long term debt you have, such as a mortgage. This type of policy is taken out for a specific number of years and the payout decreases over time, in line with your debt.
You could also consider a level term life insurance policy. Like decreasing term life insurance, this is taken out for a specific number of years, however, the payout stays the same for the entire length of the policy.
Cover as you get older
If you choose to take out a life insurance policy when you’re older, the premium will typically be more expensive. This is normally because you’re closer to your life expectancy age or you’ve developed health issues. If you do find that premiums are expensive or you’re struggling to get accepted, an over 50s life insurance policy might be best for you. This type of policy guarantees acceptance and premiums are often cheaper.
How would you like the money to be paid?
Depending on the policy that you choose, there are two types of payout available:
Lump sum
A lump sum provides your loved ones with the payout all in one go. They can use this money to pay off your existing debts and also have money left over to live off. Most life insurance policies offer this type of payout.
Income
An income will provide your family with regular payouts, so they can use the money to pay off monthly bills. You can normally be paid an income if you take out decreasing term life insurance or level term life insurance. However, because the policy is only fixed for a number of years, the income will come to an end when the term length ends.
Who needs to be covered?
If you want to cover yourself and a partner, you should consider getting a joint life insurance policy. Often, this type of policy is cheaper than taking out two individual policies, however, it only pays out once. You can choose whether it pays out after the first or second death but if it pays out after the first death, the policy will end and the survivor will no longer be covered.
The type of policy insures two people, however, you can only claim on the policy for one person's death.
Often cheaper than taking out two individual policies
It pays out regardless of which partner dies first
It’s available to any couple, whether that’s business partners or a married couples
If both policyholders die at the same time, the insurer will still only pay out once
If the relationship ends, the policy can’t be split so will have to be cancelled
If one policyholder has poor health, the premium might be higher
Compare life insurance providers
If you’re considering taking out a life insurance policy, check out our comparison table. We rank life insurance providers exclusively on product quality and the service they deliver to customers to ensure that you can get a high-quality policy from a provider that promises to be there for you when you need them.
Aviva policyholders get access to MyAviva, an online area where they can view policy documents and get exclusive discounts.
*This is a decreasing term cover quote for £150,000 over 30 years, based on a 35-year-old non-smoking female. **This quote also includes £37,500 critical illness cover. ***This is the minimum amount of life insurance cover you can get from this provider. ****This is the maximum amount of life insurance cover you can get from this provider.
