What are the benefits of life insurance?

The main benefit of life insurance is that it provides a financial safety net for your loved ones if you were to pass away.

Losing a loved one is not only an extremely overwhelming time but it can also bring about added financial stress without the right protection in place.

But how will your loved ones benefit from a pay out and what aspects of your life should you cover?

At Reassured our award-winning team can take you through the whole process of securing life insurance and provide quotes for you to compare to get a great deal.

Keep reading to find out the benefits of life insurance…

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Benefits of a life insurance policy

Life insurance is extremely beneficial for securing the financial future of your loved ones.

Here’s a quick overview of the main benefits of having a life insurance policy:

Key benefits of life insurance

  1. Provides financial protection to your loved ones
  2. Can be used to help protect your mortgage
  3. Provides the funds to help cover outstanding debts
  4. Can provide additional protection in the event of illness
  5. Can help to replace an income
  6. Help cover the expense of your funeral
  7. Avoids or minimises inheritance tax if you have a large estate (learn about placing your policy in trust)
  8. Leave an inheritance as part of your legacy
  9. Offers you peace of mind

The main benefit is that a life insurance pay out can ensure that your loved ones have the funds to help continue living their current lifestyle, without worrying financially, after your passing.

Amongst other things, a pay out can help your loved ones to pay off the remaining mortgage balance - allowing them to remain in the family home.

Upon your passing, any outstanding debts will fall to your estate. A life insurance pay out can help to ensure there’s enough money to settle these debts, as well as provide for your loved ones.

You’ll also benefit from additional layers of cover, such as terminal illness cover. Which will allow you to make an early claim on your policy if you’re diagnosed with a life-threatening illness and predicted to pass away within 12 months.

Overall, it helps to give you peace of mind that your loved ones will be taken care of financially when you’re no longer around.

Types of life insurance

There are different types of life insurance, each type is well suited to protecting different aspects of your life.

Each type of life insurance policy will also have its own set of benefits.

Continue reading to find out the benefits of each life insurance policy…

Term life insurance

With term life insurance you’ll be covered for a specified period of time (the term).

If you pass away during this time, your loved ones will receive a pay out from your policy.

If you don’t pass away during the term of your policy, your cover will simply expire.

You’ll pay a monthly premium and the price you pay will be calculated using the following information:

  • Your age
  • Your medical history
  • Smoking status
  • Level of cover
  • Length of cover

Typically you’ll be offered term life insurance with either level or decreasing terms.

Level term life insurance

Level term life insurance provides a fixed pay out amount (sum assured), meaning your loved ones will always receive the same amount no matter when you pass away during the term of your policy.

Due to this, this form of cover can help to protect an interest-only mortgage or other large debts, as well as being left as an inheritance.

Decreasing term life insurance

With decreasing term life insurance, your pay out amount will reduce over time.

This makes it an ideal option for helping to protect a repayment mortgage as you can have your sum assured reduce in line with your remaining mortgage balance.

Benefits of term life insurance

  • Decreasing term life insurance tends to be the most affordable form of cover
  • Flexibility to choose your cover length
  • Cover length can be up to 40 years (this will vary between insurers)
  • Ideal for helping to protect a mortgage
  • Large pay out amount with level term life insurance

Whole of life insurance

A whole of life insurance policy will provide you with lifetime cover, therefore it’s a form of life assurance.

You’ll need to provide information such as your age, health and wellbeing and smoking status at the point of application in order for your premium to be calculated.

Premiums will need to be paid for the rest of your life in order to keep your cover in place.

For this reason, whole of life cover can become a costly option if you take a policy out at a young age.

This makes it a great option for those who’re later on in life but still in good health as you can secure a greater sum assured than with an over 50s plan.

A pay out from a whole of life policy can be used to cover any large expenses or can be left as an inheritance for your loved ones to enjoy.

Benefits of whole of life insurance

  • Covered for life
  • Loved ones guaranteed a pay out upon your passing
  • Greater sum assured than with an over 50s plan
  • Sum assured remains level

Over 50s plan

With an over 50s plan, there’s no need to provide medical information, anyone aged 50 - 85 is guaranteed acceptance.

This makes it ideal for those in this age bracket who have struggled to secure life cover due to less than favourable health.

It’s likely your sum assured will be capped (often at £20,000).

This makes a pay out from an over 50s plan ideal for helping to cover funeral costs.

Insurers will also often add a ‘waiting period’ to your policy. This refers to the first 12 - 24 months of your policy where if you pass away due to natural causes, a pay out won’t be made.

However, any premiums paid into the policy will be refunded.

Benefits of an over 50s plan

  • Guaranteed acceptance for UK residents aged 50 – 85
  • No medical information required
  • Affordable cover for those later on in life
  • Covered for the rest of your life
  • Loved ones guaranteed a pay out

At Reassured we can compare all of the above policy types from some of the UK's leading providers.

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Benefits of whole life vs term

The main benefit of whole of life cover is that your loved ones are guaranteed a pay out when you pass away (not if you pass away).

Whereas the main benefit of term life insurance is its affordability.

Which one is best for you will depend on your needs and budget.

If you’re looking to help protect large debts, such as a mortgage, you may choose term life insurance.

If you want to guarantee your loved ones an inheritance, you may choose whole of life insurance.

Talking to a life insurance broker, such as Reassured, will allow you to gather all the information you need about both options so you can make an informed decision.

We can also compare policies on your behalf to ensure you’re getting the best price we can offer on a policy that meets all of your needs.

Securing more than one policy

Depending on your budget it’s completely possible to take out more than one life insurance policy.

For example, you may choose to take out a decreasing term life insurance policy to help protect a repayment mortgage.

You may also decide that you want to take out whole of life insurance to guarantee your loved ones an inheritance.

It’s up to you and what you think would best meet the needs of your loved ones.

Benefits of life insurance for young people

Many young people may overlook taking out life insurance, as it often associated with those later on in life.

This is because at a younger age you may not have started a family, bought a house or be considering arrangements for what will happen when you’re no longer around.

However, the benefit of taking out life insurance at a young age is that you can lock in super-low premiums.

The younger you are, the better your health and the less risk you’ll pose to the insurer.

Taking out life insurance at a young age will allow you to secure low-cost cover which can accommodate your changing needs.

At Reassured, our life insurance for young adults starts at just 20p-a-day.

Benefits of group life insurance

Group life insurance is often provided to employees by their employer and is more commonly known as death in service benefit.

If you pass away while in service with your employer, they’ll pay a lump sum to your loved ones.

This pay out will typically be a multiple of your salary.

This can be an extremely beneficial work perk as it can provide a level of financial protection to your loved ones if the worst were to happen.

However, not all employers will offer this benefit and even if they do, it can't be taken with you if you decide to leave your job.

It’s also likely that the amount paid out will not be enough to help cover all the financial obligations that will be left to your loved ones (such as paying off a mortgage and paying for your funeral).

This highlights the importance of having your own personal life insurance in place.

Please note, at the time of writing this article Reassured do not sell group life insurance policies.

What are the disadvantages of life insurance?

There aren’t many disadvantages to life insurance and at Reassured we believe that most people would benefit from having some form of cover in place.

However, there may be certain factors you may want to consider when taking out life insurance.

With term life insurance your loved ones will only receive a pay out if you pass away during the term of your policy.

If you don’t pass away during the term and outlive your policy, your cover will simply expire and you’ll need to secure new cover.

With whole of life insurance you’ll be required to pay premiums for the rest of your life to keep your cover in place.

If you take out a whole of life policy at a young age, this can lead to you paying more into the policy than it’ll pay out.

If one policy type doesn’t fit your needs, it’s likely there’s an option out there that will.

Our team here at Reassured will be able to take you through all of your options until you’ve found one that meets all of your needs.

Benefits of critical illness cover

Critical illness can be added to a term life insurance policy.

If you’re diagnosed with a life-changing illness (listed within your policy) you’ll be able to make an early claim on your life insurance policy.

This can be extremely beneficial if you’re left unable to work as the pay out you receive can help to replace any lost income.

You’ll pay extra in your monthly premium to benefit from this additional benefit.

Benefits of terminal illness cover

Terminal illness cover comes as standard with all term life insurance policies taken out through Reassured.

The benefit of terminal illness cover is that if you’re diagnosed with a terminal illness, and are predicted to pass away within 12 months, you’ll be able to make an early claim on your policy.

This helps to add an additional safety net to your policy.

You can use this pay out to help fund any private medical treatment you may need to undergo or you can use the money to enjoy with your family.

Why do I need life insurance?

Whether you need life insurance will be a personal decision, depending on your needs and circumstances.

If you’ve got dependants, it’s often a good idea to take out some form of cover to help ensure they can:

  • Remain in the family home
  • Pay for your funeral
  • Maintain their current lifestyle
  • Pay off any outstanding debts in your name

If you were to pass away a life insurance pay out could help to take care of all of the above and relieve your loved ones of any financial stress at an already stressful time.

How much life cover do I need?

Working out how much life insurance you need may seem like an intimidating task, but it doesn’t have to be.

You can ask yourself some simple questions to work out how much cover you’ll likely need. These can include:

  • Do you have a mortgage?
  • How much is your mortgage?
  • Do you have children or dependants?
  • What are the age of your children?
  • Do you have any other savings?
  • How much can you afford?

Alternatively, you can use the calculator below:

Life Insurance Calculator

Calculate how much life insurance you may need by filling in the costs you’d like your policy to cover.

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£137,934 is the estimated mortgage debt per household in the UK.

The purchase of a home is likely to be the largest financial commitment any of us will make in our lifetime. Your life insurance should cover your remaining mortgage balance to allow your loved ones to stay in the family home should anything happen to you.

Source: Moneynerd.co.uk
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The average monthly household budget in the UK is £2,548 (that’s £30,576 per year), which is spent on transport, food & drink, utilities (gas, electricity, water etc), clothing, council tax and leisure activities.

With energy prices hitting a record high and the cost of living rising sharply in the UK, you may wish to factor in utility bills and family living expenses into your cover.

Source: Nimblefins.co.uk
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The average personal debt of UK adults has risen to £34,566 (not including mortgage debt), with credit cards, personal loans and overdrafts being the most common forms of debt.

Factoring in any debts into your life insurance cover means that, if they need to be paid back from your estate after your passing, your loved ones won’t miss out financially.

Source: Money.co.uk
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According to SunLife, the average cost of a funeral in the UK is £3,953 (with the overall cost of dying at £9,200).

Funeral costs have increased by 116% since 2004 and are a significant cost which should be factored into the amount of life insurance you secure.

Source: SunLife.co.uk
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When factoring in cover for your children, you may wish to calculate the amount based on how long it is until they reach financial independence.

This could include childcare (£7,000 per year for part-time care), school expenses (£1,519 per school year for uniforms, lunches, stationary etc), as well as an additional sum for further education (this could be a contribution of up to £5,000 per year).

Sources: Daynurseries.co.uk, Primarytimes.co.uk & Savethestudent.org
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2 in 5 adults say they are relying on an inheritance to fund their retirement.

Factoring in an inheritance to your sum assured could allow loved ones to live a more financially comfortable life. Alternatively, you could leave a cash gift to a charity of your choosing.

Source: Moneyage.co.uk
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If you’re lucky enough to have your own savings or are part of the 30% of UK residents who already have a life insurance policy in place, this can provide financial protection for loved ones.

By entering your current cover, savings or death in service amount you can reduce the sum assured you require.

Source: Scottishbusinessnews.net
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Everyone will have different needs, talking to a life insurance expert can also help you to understand the level of cover you’ll require.

Compare quotes to secure your perfect policy

We hope this article has shed some light on the benefits of life insurance.

If you’re looking to secure life cover, we recommend comparing quotes from multiple providers.

At Reassured, we work with a panel of insurers - meaning we can compare quotes from some of the UK's best life insurance providers.

Our free quote service will allow you to secure the best price we can offer on a policy that meets all of your needs.

The best part is our cover starts at just 20p-a-day.

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