Life Insurance Guide Updated For 2024

Life insurance is a contract between the insurer and the policyholder, where the former agrees to provide designated beneficiaries with a cash lump sum of money in the event of the insured person’s death.

It’s one of the most popular solutions people decide to take out to give their loved ones financial security and peace of mind. 

You don’t have to be a financial expert to find the best offer for your needs. A little research should give you all the information you need – but you also must know where to find it. Don’t worry – this guide is for people like you. 

Read our life insurance guide to find answers to some of the most burning questions regarding life insurance: how many policies can you have, how are life insurance premiums calculated, can life insurance cover suicide, and will it cover funeral costs?

How Many Life Insurance Policies Can I Have

You probably know the saying, “It’s better to be safe than sorry.” Accidents happen; sometimes, a person’s life can change within seconds. As such, it’s better to have a financial safety net rather than figure out things on the go as soon as something bad occurs.

Nowadays, more and more people tend to take out multiple life insurance policies. It may get you thinking about the number of policies you can have.

The answer is not that simple – you can have as many life insurance policies as you want – and as long as you can keep up with all the premium payments. But is it actually something that would be useful and beneficial to you and your family? 

Let’s take a look at your options first.

Different Types of Life Insurance Policies

The right life insurance policy for you will depend on what you need cover for, how much life insurance cover you need, over what period, and when’s the best time to take it out. 

Below, you’ll find several different types of life insurance policies:

Term Life Insurance Policy

Term life insurance is a policy that covers you for an agreed period of time, for example, 20 or 30 years, which is then considered as the “term” of your policy. 

It can cover ongoing or urgent financial responsibilities like childcare, loan repayment, or funeral costs. 

Term life insurance policies can be further divided into three types:

• Decreasing term life cover – this type of life insurance policy means that the amount of your payout will decrease over time. 
• Increasing term life cover – in this case, the amount your insurer pays out will increase over time. 
• Level term life cover – this type of life insurance policy guarantees that your dependents will receive the same amount of money, regardless of the time they need to make their claims. 

Whole Life Insurance Policy

A whole life insurance policy, also known as “life assurance,” covers you for the whole of your life. It is usually more expensive than term life insurance. However, you don’t have to worry about the expiration date of your policy – you need to keep up with your monthly premium payments.

Joint Life Insurance Policy

Joint life insurance provides life cover for yourself and your partner in one policy. It insures two people at the same time and pays out if one of you passes away.

Over 50s Life Cover

An over 50s policy does not really differ from whole life policies because it’s supposed to cover the policyholder for the rest of their life. However, it’s suitable for people who reach a certain age – as the name suggests, they must be 50 years old and above.

Critical Illness Cover and Children’s Cover

Critical illness policy types typically provide payouts as a single lump-sum payment when you or the insured child develop an illness covered by such policies – remember that insurers might have different terms and conditions regarding illnesses and the length of the cover.

Benefits and Drawbacks of Having Multiple Life Insurance Policies

Taking out multiple life insurance policies has both advantages and disadvantages – it’s up to you to decide what works for you best:

Advantages	Disadvantages
The ability to cover various financial responsibilities	Multiple premiums to cover monthly
More payouts for your loved ones	More paperwork and legalities to take care of, especially in regards to tax law
Additional coverage translates to higher payouts	Having multiple policies might not be cost-efficient, based on your circumstances
Taking out a policy is fairly easy	Making multiple claims can be a difficult process for beneficiaries

Read our full report on how many life insurance policies you can have to get the complete picture.

How Life Insurance Premium Is Calculated

When talking about life insurance, one of the most important terms to be familiar with is “life insurance premium.” What is it, and how is it calculated? Is there a way to decrease it? Read on to find out. 

What Is Life Insurance Premium?

A life insurance premium is the amount of money you pay for your life insurance policy, usually on a monthly basis.

If you continue making these payments, your life cover will remain. It should payout when your beneficiaries need to make a claim in the event of your death.

Personal Factors That Affect Life Insurance Premiums

The lifestyle of an individual has a direct impact on their life insurance premiums in the UK. Life insurers assess various lifestyle factors to determine how much you must pay for your insurance policy.

The characteristics most commonly considered when assessing the cost of a life insurance policy include age, health, occupation and any dangerous hobbies or activities you may be engaged in.

In general, younger, more healthy individuals tend to get lower premium rates than those perceived as ‘higher risk’ due to their lifestyle choices or environment.

Let’s look at these factors in more detail:

Age

Simply put, the more likely the company is to pay out your policy, the more your premiums will cost. Your age is one of the most significant risk factors for insurers, meaning the younger you are, the lower the life insurance premiums you’ll have to pay. Millennials are certainly an age group who might benefit from lower premiums.

Smoking and Substance Use

Your insurer will consider other factors that can directly influence your longevity – smoking and substance use are among the most common reasons behind a shorter life expectancy. Sometimes, the difference between life insurance premiums for smokers and non-smokers can be twice as large.

Occupation

Some careers are considered more high-risk than others. As such, these jobs are usually charged a higher monthly premium.

Such occupations include:

• Military positions
• Police officers
• Prison officers
• Firefighters
• Fishermen
• Offshore workers

Family Medical History

Your premiums will be more expensive if you have any existing health conditions or have had any serious illnesses in the past. Similarly, your insurer would like to know whether there are hereditary conditions or other serious health issues in your family medical history.

BMI

BMI, or the Body Mass Index, determines whether you’re a healthy proportion. Being under or overweight poses some risks to your health and can affect your lifespan. This, in turn, results in higher premiums.

Mental Health and Suicide

When applying for life insurance, your physical and mental well-being are considered. However, documented mental health problems, previous suicide attempts, or instances of self-harm will not prevent you from being accepted for life insurance.

Policy Factors That Affect Insurance Premiums

Next to personal factors, several policy-related factors can affect your monthly premiums.

These include:

Length of Cover

In the case of fixed-term policies, the longer the term, the higher the monthly premium. This is because your insurer is more likely to issue a payout the longer your cover lasts.

Extent of Cover

Similar to the previous point, the extent of coverage you want to get will influence the cost of your life insurance premiums. By the extent of cover, we mean the size of any potential payout.

Policy Type

You can pay higher or cheaper premiums based on your policy type. There are many different covers available for you to take out. Each gives you a different level of protection and comes with a different price tag.

Premium Type

Life insurance premiums can also be divided into two different types:

1. A guaranteed premium – this type of premium means that the cost remains fixed throughout the policy.
2. A reviewable premium – the cost is reviewed by the insurer at regular intervals and can be increased.

Optional Extras

You can always purchase additional features to increase your cover. The most frequently chosen options include critical illness coverage, children’s cover, or income protection insurance.  

Our 2024 calculating life insurance premiums page covers all the commonly asked questions helping you to make an informed decision.

Mental Health Issues and Life Insurance Claims

Mental health issues won’t prevent you from taking out a life insurance policy. However, having a documented history of mental illness or previous suicide attempts may impact how your premiums are calculated. Also, such a policy can be considered more high-risk.

If your mental health problems are on the mild spectrum (such as mild depression, stress, or anxiety), you may be offered standard premium rates. Additionally, your premiums can decrease if you prove to your insurer that you’re undergoing treatment and managing your condition well.

The Suicide Clause

A suicide clause specifies a period of time during which the insurer won’t issue a payout if the policyholder dies by suicide. This is known as the exclusion period, usually lasting one to two years after taking out a life insurance cover.

When the exclusion period is over, beneficiaries may receive the payout from their loved one’s life insurance policy.

Life insurance providers use the suicide clause as a way to prevent policyholders from having a financial incentive to take their own lives.

The Contestability Clause

The contestability clause, or the contestability period, refers to the time an insurer can investigate the death of a policyholder before issuing a payout to their beneficiaries.

It usually runs for the same length as the suicide clause but applies to any cause of death, not just suicide, within the period stated in the terms and conditions of the policy. 

While investigating the cause of death of a policyholder, insurers can use autopsy reports, medical reports, specialist referrals, hospital admissions, and interview family or friends of the deceased person. 

Does Life Insurance Cover Suicide?

The answer to this question is – it depends. Suppose a policyholder commits suicide while the exclusion period is still in place, for example, within the first year of taking out their life insurance policy. In that case, their life insurance will not cover it.

If the policyholder passes away due to suicide after the exclusion period ends, their beneficiaries may be eligible to receive the payout. Still, their insurance company must assess their claims, just as it would in other cases.

Suicide is one of the most common causes of death worldwide. In the UK alone, it has become a national issue, with an average of 20 suicides per day as of 2023. 

Unfortunately, these numbers are on the rise. More and more people struggle with mental health issues, which, in turn, may prompt them to have suicidal thoughts.

Still have questions about life insurance and suicide? Click here to learn more.

Does Life Insurance Cover Funeral Costs?

Funeral costs have increased at a faster rate than inflation – 128% since 2004. While thinking about your own funeral is certainly not a pleasant activity, it might be better to prepare beforehand and give your loved one’s peace of mind. Fortunately, you have at least two options: a life insurance cover and a pre-paid funeral plan.

Read on to discover how these two solutions can help you cover funeral costs.

What Is a Funeral Plan?

A funeral plan is an agreement with a funeral plan provider to carry out your funeral when the time comes. It allows you to pay a fixed sum for your funeral services in advance. You can decide how much is spent on your funeral and choose the type of funeral you want to have.

The Difference Between a Life Insurance and Funeral Plan

Here’s a rundown of the major differences between life insurance policies and funeral plans:

Life insurance	Funeral plan
Pays out a lump sum in cash if you pass away during the term of the policy	Guarantees to cover your funeral services at today’s rate
Requires monthly premium payments	Provides you with several payment options – pay in full or divide the cost with monthly instalments
Depending on the type of policy, premium payments continue until the policy expires or until you pass away	Payments end when the funeral plan has been paid in full
Provides your loved ones with an additional layer of financial support, which can be spent how they see fit	Has no cash value – the funds can be used only for your funeral
Different policy types to suit individual needs and budgets	Different funeral plans to suit different needs and budgets
Requires underwriting to determine how much it will cost you and whether you qualify for the cover	No medical questions asked, guaranteed acceptance

Does Life Insurance Cover Funeral Costs?

Life insurance is not designed to function as a funeral cover. Your beneficiaries can use the payout to take care of some of their most important financial responsibilities, other than your funeral cost (such as regular payments, mortgage, tuition fees, debt repayments, and so on).

However, it can provide sufficient financial support, making it possible for them to pay for your funeral with the funds from your life insurance. Still, have questions about life insurance and funeral costs? Click here to learn more.

Our life insurance checklist breaks down the life insurance process into simple stages that are easy to understand.

Why Use Insurance Hero?

Insurance Hero specialises in providing life insurance information to people performing various professions. We have relationships with a strong network of specialist insurers. Our website will help you find life insurance that is carefully tailored to your needs and at competitive prices. 

Death In Service Or Life Insurance?

Death-in-service insurance is a type of benefit that provides a cash payment to the beneficiary of an employee who passes away while employed.

On the other hand, life insurance is a form of protection that pays out in the event of someone’s death, regardless of when it occurs.

Death-in-service insurance may be more beneficial if the policyholder dies while employed, as it can offer a more significant sum than life insurance policies.

However, life insurance offers greater flexibility and can provide much-needed financial support if death occurs due to unexpected circumstances or at a later stage in life. Our death in service or life insurance guide offers a complete and detailed explanation of the subject and is well worth a read.

Life Insurance vs Mortgage Protection Insurance

Life insurance and mortgage insurance are two very different types of insurance. Life insurance offers a lump sum payout to the insured individual’s beneficiary if they die. In contrast, mortgage insurance protects your home loan provider if you can no longer make payments.

Life insurance is designed to protect your loved ones financially after you pass away. In contrast, mortgage insurance helps cover the financial loss associated with foreclosure or default on a home loan.

Regardless of which type of insurance you choose, both offer valuable financial security for individuals and families. The pros and cons of both are described in detail in our new life insurance vs mortgage insurance guide.

Life Insurance Vs Critical Illness

Life insurance is a type of policy that provides a financial payout to your family in the event of your death. Critical Illness Cover, on the other hand, pays out if you are diagnosed with an illness specified in the policy, such as cancer or heart disease.

While both products offer essential protection, each person must assess their unique circumstances and decide which product is best for them. Our life insurance and critical illness cover comparison page goes into more granular detail and will help you decide which option suits you best.

Whole vs Term Life Insurance

Term Life Insurance is a type of life insurance that provides coverage for a defined period. If the policyholder dies during this time, the death benefit will be paid out to the listed beneficiaries.

Term policies typically last 10-30 years, and premiums are usually much more affordable than those associated with other types of policies like permanent ones (whole life).

Whole Life Insurance is a form of cover that not only provides an outright death benefit but can also provide cash value over time as well.

This type of policy has fixed premiums that never change throughout its duration. It offers guaranteed cash values that become available after specific periods have lapsed, such as surrendering or borrowing against it, something you cannot do with term policies.

Whole life policies also have no set expiration date. Because these benefits come with higher premiums due to their long-term nature, they aren’t often suitable for shorter-term needs or tight budget constraints. Our whole vs term life insurance report offers further detailed insights you might find helpful.

Life Insurance Exclusions

UK life insurance policies typically exclude deaths resulting from self-inflicted harm or suicide.

Some policies also may not cover an individual if they die due to a dangerous activity like skydiving or skiing without their insurer’s knowledge and approval.

Other life insurance exclusions can include any death caused by a preexisting medical condition, certain types of employment, or health conditions that were not disclosed to the insurer at the time of purchase.

What Happens If You Outlive Your Term Life Insurance Cover?

When it comes to term life insurance, the answer to what happens if you outlive a term policy is fairly straightforward.

Once the policy has expired and you are still alive, your death benefit is no longer paid out. Instead, any premiums you have paid for the policy will be forfeited, meaning that effectively all of your money spent on the policy was lost.

Additionally, most policies allow you to convert from Term Life Insurance into a permanent plan (such as whole of life) at some point during or after the expiration of their existing Term Life Insurance contract without medical underwriting. However, there may be some additional costs.

Securing Your Future

Life insurance is a proactive step, much like making lemonade from lemons, ensuring that even in sour times, you’re prepared to offer sweetness to those you love.

Life Insurance Guide Conclusion

Life insurance is an invaluable tool that can provide you and your loved ones with financial security in the event of an unexpected death.

While it may not be the most exciting subject, life insurance provides peace of mind and stability for families facing challenging financial burdens.

Whether you are young and just starting out or approaching retirement age, life insurance offers many benefits, assuring your family’s future is secure no matter what comes their way.

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