How does life insurance work in UK?

Taking out life insurance allows you to protect your family financially when you’re no longer around.

If you pass away, a cash pay out will be made to your loved ones.

Many people perceive life insurance to be confusing, but it doesn’t have to be.

Life insurance works in four simple steps:

  1. Application
  2. Pay premiums
  3. Claim
  4. Pay out made.

Using an FCA regulated broker allows you to obtain all the information you need to make an informed decision and secure the best deal.

Read on to find out how life insurance works here in the UK…

How does life insurance work UK?How does life insurance work in the UK?


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How does buying life insurance work?

Buying life insurance doesn’t have to be difficult.

Once you’ve determined the cover you need, you can purchase life insurance directly from any insurer or from a price comparison website.

Alternatively, you can use an FCA regulated broker who’ll complete the application on your behalf whilst also securing the best available deal.

You’ll be required to provide information regarding your personal circumstances, well-being and the cover you require.

Once the application has been accepted, your cover will commence.

Get in touch today to start your hassle-free life insurance application.

How does a life insurance policy work?

Your life insurance policy is essentially the contract of cover between you and your insurance provider.

It provides your loved ones with a cash pay out if the worst were to happen to you.

In your policy you’ll nominate beneficiaries who’ll benefit from your pay out when you pass away.

You’ll pay a monthly premium for your protection and will be covered for both natural and accidental causes of death.

It’s important to make sure you’re familiar with the terms and conditions of your policy to ensure it protects you against everything you require.

Your policy will expire if your term comes ends or if you pass away.

Contact us today to speak to our friendly team who can guide you through the entire process.

How do life insurance premiums work?

The amount you pay for your premium will largely be based on your age, health, the amount of cover you want to take out and how long you want to be covered.

This information allows insurers to calculate how much of a risk you pose. The higher the risk, the more you’ll pay for cover.

Your policy will protect you as long as you keep up to date with your monthly premiums.

Failing to pay your life insurance premiums can lead to your policy lapsing and no pay out being made upon your passing.

At Reassured, we can arrange cover from as little as 20p-a-day, simply get in touch for your free quotes.

How does life insurance pay out work?

A life insurance pay out refers to the sum of money received by a policyholder’s beneficiaries upon their passing.

After you’ve passed away your beneficiaries, or trustee, will contact your insurer to make a claim.

The insurer will then review the claim and a pay out will be issued if the claim is valid.

In 2018, 99.6% of UK claims were paid out.

In order for the claim to be valid:

The funds will be paid to your beneficiaries as a lump sum to a UK bank account.

A life insurance pay out is not instant, it can take around 30 days.

However, in some rare cases, a pay out can be delayed due to the contestability clause.

This is a 24-month period where further information about the death can be requested by the insurer to ensure a claim is valid.

If the claim is found to be invalid, the pay out will be declined and no funds will be paid out.

On average, our insurers pay out over 99% of claims made.

Life insurance payout claimsLife insurance pays out 99.6% of claims


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What should life insurance cover?

What your life insurance policy should cover will depend your needs.

The type of cover you take out will depend on your unique personal circumstances and what you want to protect.

There are different types of life cover, each suited to protecting different aspects of your life.

The following questions are a good starting point for working out what your life insurance should cover.

At Reassured our number one priority is to find you a policy that meets all of your needs.

Get in touch today to discuss the best solution to suit your needs.  

Types of life insurance

Typically, insurance policies in the UK are term-based or whole of life.

This means that your policy will either expire after a certain period of time (and a pay out will be made if you pass away during this time) or it will last until you pass away.

Keep reading to understand how each policy type works…

How does term life insurance policy work?

A term life insurance policy works by providing cover for a specific period of time (the term). 

In the UK there are two main types of term life insurance:

You’ll pay monthly premiums for your cover which will be determined by the level of risk you pose to the insurer.

Term life insurance can last for up to 50 years.

If you pass away during the term, a pay out is issued to your beneficiaries.

If you don’t pass away, no pay out is made and your policy expires.

Compare level vs decreasing term life insurance quotes with Reassured today.

How does level term life insurance work?

With level term life insurance, your sum assured (the cover amount) will remain fixed throughout your policy.

This means that no matter when you pass away (during the term) your loved ones will always receive the amount that was agreed when you took your policy out.

As a result, it’s ideal for helping to pay off large expenses, such as an interest-only mortgage or covering rising funeral costs.

Compare multiple level term life insurance policies using our FCA regulated broker service.

How does decreasing term life insurance work?

The difference between level term and decreasing term is that the amount paid out will reduce over time.

This type of cover is great for paying off a repayment mortgage as you have your sum assured reduce in line with your mortgage repayments.

To secure the best deal on a decreasing term policy, get in touch.

What happens if you outlive term life insurance?

If you outlive the length of your policy, no pay out is made and the policy expires.

A pay out will only be made if you pass away whilst your policy is still live.

Do you get your money back at the end of term life insurance?

The premiums you’ve paid won’t be refunded if you outlive your policy.

If your policy comes to an end due to your passing, funds will be given to your loved ones in the form of your pay out.

What happens when you cancel term life insurance?

If you cancel your policy, you’ll no longer be covered and your family no longer protected.

There’s nothing stopping you from cancelling your life insurance policy at any time, but it should always be a last resort.

You’ll not be refunded any of the premiums that you’ve paid in.

There should be no extra charges for cancelling but it’s a good idea to check the terms and conditions of your policy as they can differ between providers.

If you can no longer afford to pay your premium, you can reduce your level of cover or try and find a cheaper policy elsewhere.

If you cancel your policy and choose to take out a new policy later in life, the premiums you’ll pay may cost a lot more due to your age, making comparing quotes even more essential.

Using an FCA regulated broker service, like Reassured, you can secure cover from 20p-a-day.

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How does whole of life insurance work?

Whole of life insurance provides you with lifetime cover.

You’ll be covered for the rest of your life, meaning your loved ones are guaranteed a pay out after you pass away.

This pay out sum will hold its value.

Like term cover, insurers will calculate how much of a risk you pose and this will calculate your monthly premiums accordingly.

You’ll continue to pay premiums for the rest of your life which can result in paying more into your policy than the pay out amount.

As a result, this type of insurance tends to be well suited to those in later life who are in good health.

If you fail to make payments, your cover will cease.

Call us today to compare whole of life quotes.

How does life insurance over 50 work?

Over 50s life insurance guarantees acceptance to anyone in the UK aged 50 – 85 and no medical information is required. 

Once you’ve taken a policy out, you’ll be covered for the rest of your life.

What makes an over 50s plan different is that no medical information is required.

Instead, your premiums are based on your age and how much cover you want to take out.

While your cover will last for the remainder of your life, some insurers only require you to pay premiums for 30 years after you took out the policy (or until you are 90).

For example, if you take an over 50s policy out at the age of 60 you’ll pay premiums until you’re 90.

Due to the unknown risk you pose to the insurer, premiums tend to be higher and your sum assured will be capped at £25,000.

There is also a waiting period (which is usually 12 – 24 months after taking the policy out), which means no pay out will be made if you pass away of natural causes during this period.

However, the premiums that have been paid will be refunded.

At Reassured we arrange over 50s plans from just 20p-a-day, get in touch for a free quote.

How does life insurance for a mortgage work?

Life insurance for a mortgage provides a lump sum pay out that can be used to pay off your mortgage after you have passed away.  

This is often referred to as mortgage life insurance or mortgage protection. Please note, mortgage payment protection insurance (MPPI) is a separate product.

This involves taking out life insurance (usually level or decreasing term) with the specific purpose of covering your mortgage if you were no longer around.

A lump sum pay out will be made to your family which can be used to pay off your mortgage, allowing your loved ones to remain in their home.

A mortgage is likely the largest debt we’ll incur in our lifetime, so it’s important to have adequate cover in case the worst were to happen.

To protect your mortgage, call us today to secure cover.

How does joint life insurance work?

Joint life insurance covers two lives simultaneously.

There is one contract and one premium to pay each month and the terms are in place to protect both parties.

You’ll apply with one application that gives details about both parties and the premium that you both pay will be determined by these factors.

Taking out a joint policy can save you around 25% compared to two separate policies. 

However, it’s important to note that there will only be one pay out, usually after the first death.

Once the pay out has been made, the cover expires. Leaving the surviving party to find new cover.

By using an FCA regulated broker service, you can compare both single and joint life insurance quotes.

How does life insurance work after divorce?

Many insurance providers don’t offer the option to split a joint life insurance policy or remove one party to make it a single policy.

If your provider doesn’t allow this option, you’ll need to come to an agreement with your ex-spouse or the policy will need to be cancelled.

If the policy has been written in trust this can also pose more problems as some trusts can’t be altered once written, in which case the proceeds may be paid to your ex-partner.

Reassured are an independent life insurance broker who can help you secure suitable cover protection.

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How does life insurance in trust work?

Writing your life insurance policy in trust is a legal arrangement that allows your beneficiaries to benefit as much as possible from your investment.

It’s a completely free option that involves placing someone you trust in charge of your life insurance policy.

After your passing, they’ll manage the pay out and be responsible for distributing as you intended.

Writing your policy in trust detaches it from your estate (your money, property and possessions), meaning it gets paid directly to your beneficiaries and is not subject to 40% inheritance tax.

It also allows for the proceeds to bypass probate, resulting in a faster pay out. 

At Reassured our customer services team can help you write your policy in trust, free of charge.

How does life insurance work after death?

Once you’ve passed away your loved ones will need to contact your insurer to let them know of your passing.

A claim can be made straight away. If you’ve named beneficiaries in your policy, only they’ll be able to make a claim.

Upon receipt of your death certificate, your insurer will be able to issue a pay out.

On average it can take up to a month for the funds to be paid to your beneficiaries.

If you’ve not named any beneficiaries, you’ll die intestate and the rules of intestacy will dictate who gets to claim your estate, (this is usually your next of kin).

It’s important to know that when your life insurance becomes part of your estate it is subject to 40% inheritance tax.

By writing your policy in trust not only can you ensure your pay out is distributed the way you want but can also avoid inheritance tax as your policy becomes detached from your estate. 

How does life insurance work if you don’t pass away?

If you outlive the term, your policy will expire and no pay out will be made.

You’ll then need to find new cover to protect you for the remainder of your life.

Depending on your age and health you could take out whole of life insurance or an over 50s plan.

If you’re later on in life, have no dependants and have paid off your mortgage you may consider opting for a funeral plan instead.

Using a broker service you can compare quotes to see what will be the most cost-effective option for you.

Get in touch with us today to quickly and easily compare all of your options.

Compare life insurance quotes, (save money)

Now you have a better understanding of life insurance you should be able to make a more informed decision when taking out a policy.

You can use our completely free FCA regulated broker service to compare quotes from the UK’s largest insurers.

Alternatively, you can contact us for further information or with any other questions you have.

A friendly member of our team will be happy to help you through the process.

Get in contact today and put us to work, (we don’t charge you a fee).


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