Think about why you might need cover
- what would happen if you died or were ill for a long time
- who are your financial dependents: your husband or wife, children, brother, sister, or parents
- what kind of financial support does your family have now
- what kind financial support your family will need in the future
- what kind of costs will need to be covered such as household bills, living expenses, mortgage payments, education costs, debts or loans, funeral costs
- whether you can afford to pay regular premiums or a lump sum
- what factors might affect your premiums – many life cover policies look at your age, occupation, lifestyle, pre-existing and family medical history
- whether you would need to include critical illness cover because of your family medical history
If you have loved ones, such as children, a partner, or other relatives, who depend on your income to cover debts, bills, or living expenses, then it may be worth considering taking out life cover. It will help to provide some financial support to your family if you die.
However, you may already be covered by a group life scheme (often known as death in service benefit) through your employer. It is worth checking with your HR department to find out what it covers before considering taking out another policy.
Life cover is important if you are:
- just married
- a young couple just starting out
- new parents raising a young family
- a mature family starting to think about the future
- a retiree who may survive their partner and need financial support
Some reasons for taking out life cover:
- getting married
- buying a house
- starting a new job
- applying for a mortgage or loan
- the birth of a child
Types of life cover
There are different types of policies which can give you lump sum payments, or a regular monthly income (if you have family income benefit). To decide on which cover you need, think about the questions and your reasons for choosing one of these policies.
- term insurance
gives you life cover during a pre-agreed period of time
- group life cover
gives you life cover through your employer
- critical illness
gives you cover for specific medical conditions
- over-50 plans
gives you cover towards funeral costs, paying debts or if you want to leave some money to loved ones if you die
- whole of life plans (also known as life assurance)
gives you cover for your entire life; it can meet your debts or be left to a loved one when you die
Life Insurance Investment Policies
The recent case of Joost Lobler considered the case of someone who had been hit by a substantial and disproportionate tax bill having made a disadvantageous choice in how to realise his investment in a cluster life insurance policy. However, this was not the first instance of investors coming to grief in this way – and even before the Lobler case, the ABI has been considering how the risks to customers in this area might be mitigated.
We are hopeful that legislation will be enacted in due course to limit the possibility of customers being caught out in this way in the future. However, in the meantime the ABI has developed a statement of good practice designed to help providers mitigate the potential for problems in this area.
