Life insurance explained

What is life insurance?
Rose St Louis, Life Insurance Expert

Life insurance could be the most important financial product you ever buy.

It's not easy to think about, but the reality is when you die your family or partner might struggle financially.

Having the right life cover in place can help them, and it could be the difference between being able to pay the mortgage or losing their home.

You can choose the amount of cover you need and how long you'd like the cover to last, which might be until the mortgage is paid off or your children leave home, it's up to you.

This will provide you and your family with some reassurance they can continue their standard of living without serious money worries even after your death. The cost of the cover is based on a number of factors such as your age and health.

There are lots of different life insurance policies to choose from so it's important to understand exactly what's available and what you'll be covered for before buying.

As well as life insurance, you should also consider critical illness cover. This can help protect you from the financial impacts of a serious illness such as cancer heart attack or a stroke by paying a lump sum if you suffer from one of the conditions covered in your policy.

For more information visit the Scottish Widows website or speak to a financial adviser.

How much does life insurance cost?
Simon Vooght - Life Insurance Expert

Life insurance can play an important part in protecting your family's financial future.

Some people feel it's important to have life insurance in place but others can see it as an unnecessary expense.

You'll need to work out what is right for you based on your needs, so for example your mortgage, any loans that you have, whether or not you have a family, your income, and also how much you can afford.

Having the right cover in place when you die can be the difference between your family losing their home or being able to maintain their current lifestyle.

The cost of life insurance is based on a number of different factors such as your age, your health, your job, whether or not you smoke, the length of time that you want the policy to last and also the amount of cover that you need.

Generally, the younger you are when you take out the cover the lower the cost so it's worthwhile considering life insurance as early as you can.

For more information visit the Scottish Widows website or speak to a financial adviser.

What is critical illness cover?
Amit Mistry - Life Insurance Expert

Unfortunately serious illness has a huge impact in the UK with almost 1,000 cancer cases diagnosed every day and someone suffering from a stroke around every five minutes.

It's not something you might think about, but with one in four women and one in five men being diagnosed with a critical illness each year before retirement, how would you and your family cope if you could no longer work, or had to take time off to recover from a serious illness.

Critical illness cover is there to provide you and your family with financial security if you do suffer from a serious illness and need to give up work, or take time off to recover.

Critical illness cover normally includes a number of serious illnesses and includes heart attacks, strokes and certain types of cancer.

You'll be able to get a full breakdown of the cover from an insurance company and it's very important you're clear on what conditions your policy does and does not cover.

If you do suffer one of the critical illnesses covered in your policy, your insurer will pay out your cover amount as a tax-free lump sum to help you cope financially and meet the cost of bills such as mortgage payments and day-to-day living costs.

With advances in medicine more people are surviving a serious illness but it can still have a major effect on your ability to work, so cover can provide you and your family with financial support while you focus on what really matters, concentrating on your own health and well-being.

Some policies may also pay a monthly amount rather than a lump sum. Some pay out a smaller amount for less severe additional conditions and provide cover if your child suffers a critical illness, but you need to check this with your insurer.

For more information visit the Scottish Widows website or speak to a financial adviser.

How long do I need life insurance for?
David Cunningham - Life Insurance Expert

When you take out life insurance, it can either last for the rest of your life, known as whole of life assurance, or for a fixed period of time, known as term assurance.

There are advantages and disadvantages to both, it really depends on your personal circumstances.

Term assurance is the most common type of life insurance and covers you for a set time period. 

You can select how long you want this to last, and it is typically used to cover loans such as a mortgage, to protect your partner or family's lifestyle, and to help provide for them after your death.

If you die during your policy term, your family and dependents will receive a payout, but if you're still alive at the end of your term, it will end and you'll get nothing back.

It is also worth noting your policy has no cash-in value throughout your policy term.

Term assurance can also be taken on a level basis or a decreasing basis.

A level basis means that cover amount stays the same throughout the term of your insurance policy, whether this is in the first or the 20th year.

With a decreasing basis your cover amount will reduce gradually over the length of your policy reducing to zero at the end of your chosen term, similar to have a repayment mortgage works.

Decreasing cover is usually cheaper but you should consider what what's best for you and your circumstances.

Some providers also offer whole life assurance, sometimes known as over 50s insurance, and your insurance company can help you work out what is best for you.

This cover will last for the whole of your life with you paying a premium every month and the policy paying out to your family on your death, whenever that may be.

You could take this type of cover to pay for funeral costs, to help with inheritance tax planning, or leave extra funds for your family.

As it’s a guaranteed payout, this can give you a complete peace of mind.

For more information visit the Scottish Widows website or speak to a financial adviser.

How do I claim on a life insurance or critical illness policy?
Dave Thompson - Life Insurance Expert

Moving home is one of the most exciting times in our lives but on top of buying new furniture it's often one of the most expensive times with council tax and mortgage payments.

Life and critical illness insurance can be a good idea to help cover these costs if you were to die or suffer from a serious illness.

It's designed to help you your partner and your family financially through the most difficult times.

Life insurance could pay off your mortgage if you were to die, while critical illness cover could pay off your mortgage if you were to suffer from a serious illness covered by your policy.

Without insurance you could leave yourself or your family in financial difficulties.

You don't have to take out this type of insurance with your mortgage but some mortgage lenders may recommend that you do.

You can do this with any life insurance company not just your mortgage lender.

Having no life or critical illness insurance in place could result in you and your family losing their home if you were to die or suffer from a critical illness, so it's recommended that you get the right cover in place to provide the security that this won't happen.

For more information visit the Scottish Widows website or speak to a financial adviser.