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What is Life Insurance?

Life Insurance protects your loved ones.

  • Life Insurance provides cover for your family.
  • It pays out a cash lump sum or income if you die.
  • You are able to personalise your cover for your family.

We will find you the best cover.

  • About Life Insurance
  • Costs

With Life Insurance cover the payout amount remains level throughout the entire duration of the policy.

This type of life insurance pays out the lump sum if death occurs within the length of time of the policy. It does not payout after the policy expires. Level-term coverage is available either as joint or a single policy. In addition, Life Insurance will payout if diagnosed with a terminal illness, but some companies will not do this within the last twelve months (one year) of the term.

This is the most common type of life insurance and is designed to provide a set payout to your beneficiaries. You decide the term and level of coverage at the time of application, either as a joint or single policy.

Here's how life insurance works:

  • Pay the monthly premium to the insurance company. This amount will remain the same throughout the length of the policy.
  • In the event of your passing, the insurer pays out the fixed amount (known as 'sum assured') to your beneficiaries, as long as your death occurs within the set period of time of the policy.
  • If you are the sole financial provider for your family, Life Insurance could be crucial to your family and their well-being after your death. Many individuals purchase this insurance to provide funds after their death so their families can pay for funeral expenses, repay a mortgage, or provide funds for living expenses and maintaining the lifestyle from before the death. The Life Insurance policy provides protection and security to your loved ones during a difficult and emotional time.

The cost of a Life Insurance policy will be contingent on the amount of coverage purchased and length of term, as well as age, health, and lifestyle.

Whenever you apply for life insurance, the insurer will determine what the risk is of them having to pay out on the policy. This determination will influence the cost of your monthly premium. The larger the sum assured and longer term of the policy, the more expensive your monthly bill will be. You will only pay this premium for the length of the policy term. It's important to keep this in mind when purchasing a policy to make sure you can sustain the payments throughout its term so there will be no adverse effect on your life insurance coverage.

How do I know how much life insurance coverage to purchase?

It is entirely up to you as the purchaser to decide what you want the payout, or sum assured, to be at the time of your death. To determine how much coverage to purchase, you should think about your budget, as well as the needs of your family after your death. Do you want only enough money to cover your funeral expenses or do you want your survivors to have some additional money to live on as well? These are important questions that can help you figure out how much coverage to buy.

How long does level-term life insurance last?

When purchasing level-term insurance, your coverage has a specified period of time associated with it, known as 'the term.' Remember, the longer period of time chosen, the more expensive your monthly bill will be. You set the term as the policy purchaser, but most insurance companies do have a maximum age limit when your policy can end, usually around 80 years of age, though this will vary by company, as some insurers extend the age to 90 years old. If you want to guarantee coverage until the end of your life, no matter what your age, whole of life insurance would be more appropriate for you.

If cost of the monthly premium is a problem, it may be beneficial to shorten the term of your life insurance in order to drop your monthly premium.

Regular Life Insurance not for you?

Perhaps your budget may not fit with a regular Life Insurance policy. An alternative option that could work is 'decreasing term' Life Insurance. In this type of insurance, the sum assured decreases over the term of the policy. As such, it is suited to mortgage repayment because the policy coverage decreases as your mortgage decreases. This type of insurance does not however, provide additional funds for your family after your death. If you do want your family to be taken care of financially after your death, then level-term is appropriate because you can choose a policy that will cover both the repayment of the mortgage, as well as providing money to your survivors. Whole of life insurance is a guaranteed payout for your family, but if monthly premiums are a concern, this type of policy might not be favorable, as it is the most expensive.

Common questions

  • Do I really need Life Insurance aaa

    With all the expenses of everyday, it's easy to think that life insurance is an unneeded expense. But it couldn't be farther from the truth if you have a mortgage, family, or dependents that rely on your income. Purchasing a policy when you are able to assure the future of your loved ones after you are gone, is priceless.

    If budget and pricing is your concern, there are a number of life insurance policies that exist that can fit with your budget and needs of your family after your death. Each policy is different and the amount of coverage you purchase will depend on your financial situation. There are a number of factors to consider when deciding what size policy is right for you, including: funeral expenses, amount repayment left on home mortgage, cost of living for family, education for children, and more. The higher you want the payout to be after you are gone, the higher your monthly premium will be for the term of the insurance. It's important to choose a plan that fits with your current budget so that in the event of your death, the policy is active.

  • Will the insurance company actually pay my relatives? aaa

    There are many stories of family members hassling with insurance companies after the death of a loved one in order to get their rightful money. While these situations unfortunately do happen from time to time, the truth is that the majority of life insurance companies pay out over 90% of claims.

    In the rare cases where insurance claims do not pay out for life insurance policies, there are a number of extenuating circumstances usually at play. These include:

    • The insured lied or omitted information on original application: The lifestyle and medical questions that are part of the application for life insurance are an important part of the insurance industry's way to assess risk and how much it costs to insure you, which determines how much you will pay per month on the policy. These questions are vital to their business model, so if an individual leaves out essential information, such as being a diabetic, this could drastically impact the original assessment and the ability for your family to get their financial benefit during the time of need.
    • The specific cause of death is not covered by the life insurance policy: Often, most companies will not pay out if a death occurs within a year (12 months) of policy purchase and if it was ruled a suicide.
    • Certain critical illnesses have a severity rating: Some insurance policies have critical illness coverage, but only if the illness meets certain criteria of severity. For example, a person may die of stomach cancer, but it was not in an advanced stage of illness, so the coverage would not be applicable.
    • Death occurred after term of policy was done: Term-life insurance is only for a specific amount of time, so if someone dies outside of that term, their coverage is void and there is no policy to pay out.
    • Death occurred before the required minimum period: This applies mostly to whole life insurance or 'over 50' policies that require a person be alive two more years after the time of policy purchase before the life insurance benefit would pay out. That means if an individual passes away during that two-year period, there is not insurance payout, but some companies will refund the premiums paid during this time. Depending on the company, there could be a payout in this early stage if the death was ruled an accident.
    • If a person does not pay monthly premium or cancels policy: If a person fails to pay their monthly life insurance bill or cancels the policy, it is null and void and no payout will occur at time of death.
  • Is there a limit to the number of life insurance policies I can have? aaa

    Absolutely not! It is up to each person how much and the type of coverage they have in order to provide for their loved ones at the time of death. Having multiple policies cannot affect the existing policies or even future policy purchases either. It is important to remember that life insurance is cheaper when younger and healthier than purchasing a policy later in life.

    There are times in life when you might consider purchasing additional coverage to fit the changing needs and demands of you and your family. These include:

    • New additions to the family (births, adoptions)
    • New mortgages or loans

    Both of the above circumstances could require additional coverage to your life insurance to make sure that loved ones are provided for and do not incur any financial difficulty in the wake of your passing.

    • Critical illness coverage: This type of coverage covers you in the event you are diagnosed with a critical illness such as cancer. This coverage often is paired with traditional life insurance as it pays out if you are diagnosed with the illness, to help with medical costs associated with the disease, in additional to the payout your family would receive at the time of death.
    • Income changes: If your budget improves and you have additional funds on hand each month, it is a great investment in your family and their future to put those extra dollars towards your life insurance policy.

    If you elect to shop around for new or additional life insurance, make sure to be diligent in how any previous policies are canceled. In the event you need to cancel a policy, make sure to compare rates and that the new policy will offer you the same amount of coverage at a rate you can afford. Prices are set by age, health, and lifestyle; every company uses a different method to determine the risk to insure you, rates can differ greatly from each company to another. Because of this, if you are older or have a change in your health, it could be much more expensive to buy a new or additional policy than it was for the original one. Conversely, if your health or lifestyle has improved (such as quitting smoking), then any new rates could be lower and to your advantage.

    With some policies, it is possible to increase within your existing policy - called 'guaranteed insurability'. This change is often restricted to the following circumstances though: increased mortgage amount, marriage or divorce, birth/adoption of child, or salary increase.

  • How much wills a life insurance policy cost me? aaa

    Life insurance costs a different amount for every person because it is dependent on how old you are, how you live your life, and how healthy you are. Unlike car and home insurance though, the consumer can set the price they want to pay for their life insurance premiums. It is up to each person to decide how much coverage they want and what the needs of their policy are. Life insurance is tailored to the individual.

    When thinking about life insurance coverage and costs, companies look at two big things with each potential customer: what is the likelihood that they will have to payout on your policy AND how much will it cost them to do it? In order to figure this out, each company employs a method of assessing those questions, based on the criteria of age, health, and lifestyle.

    Age: The older you are, the greater the risk that an insurance company will have to pay out on your policy. The younger you are at the time of policy purchase, the lower the premium will be (usually). Most insurance companies will not cover individuals over a certain age, often 90.

    Health: Your health, medical history, and wellbeing are important factors in determining the cost of your health insurance. If a person has more medical issues or a history of bad health, this could increase the monthly premium on your policy.

    Lifestyle: How you live your life and the choices you make have a direct impact on the length of your life. Excessive drinking, smoking, or other habits that could be risky to your life are all factored into the assessment done when applying for insurance. With most companies, smokers typically pay almost double the premium than a non-smoker.

    Occupation: What you do for work can have an impact on the risk assessment. There are some jobs that are higher on the risk scale for insurance companies than others, such as military or professional athletes. Any job that puts your life at a higher risk for death can increase the monthly premium because of the cost to insure you. It is possible that some companies could deny coverage for individuals who are deemed too risky to insure because of lifestyle or occupation.

    Costs of different types of insurance

    Depending on your needs, each type of insurance has varying cost levels associated with it, with some costing more than others, all dependent on when and what the payout could be.

    • Decreasing term life insurance/ mortgage life insurance: Because this type of insurance is constantly decreasing as you make payments on your mortgage, it is the cheapest type of life insurance. It will pay out at the time of your death within the specified term of the policy.
    • Life Insurance: This most common type of life insurance where the death benefit to your family is the same over the term of the policy. There are many affordable options within this category of insurance.
    • Whole of life insurance: Because this type of insurance (often called "over fifty") is a guaranteed payout by the company, it is the most costly type of life insurance.
    • Joint or single policy: Life insurance can be purchased either as a single, stand-alone policy or as a combined, joint policy with your partner. It is important to know the restrictions on a joint policy, as some companies only allow one single payout for the partner of the policy who passes first. Joint policies are often cheaper than a single life insurance purchase.

    The term and sum insured amount of your policy will also affect the overall cost to you. The longer a term within a policy, the increased likelihood that an insurance company is going to have to pay out on the policy. Therefore, choosing a shorter term when purchasing your policy can reduce the monthly premium cost to you. In addition, the more coverage you have is the amount the insurer will have to pay out in the event of your death. This means that your monthly bill for that insurance will be higher to cover their payout loss. If you are trying to stay within a budget, decreasing the amount of coverage is a possibility, but make sure to adequately estimate your family's financial needs after your death.

  • Medical history, lifestyle, and life insurance aaa

    Every application for life insurance, no matter the company, will require a series of questions regarding your health, medical history, and habits. This helps the insurance company understand all the risks associated with insuring you and come up with a cost that they will pass on to you in the form of your monthly premium. It is important that the information provided is truthful, current, and adequately displays who you are and the life you lead.

    These questions include: height, weight, occupation, whether or not you smoke or drink alcohol, family medical history, past or existing medical conditions, and hobbies. The hobbies questions are mostly geared towards those individuals who may participate in extreme recreational activities such as skydiving, which greatly increases their risk of death.

    The insurance companies do not use the medical questions to disqualify applicants, but rather to know as much as possible about an applicant so that life insurance coverage can be tailored to the needs and budget of each person. That's why it's crucial to be honest and transparent when doing the questionnaires because there is the possibility that an insurer would not pay out on a policy if the applicant lied about an aspect of their life or health, like not disclosing a pre-existing medical condition. Unlike when you apply for a mortgage or credit card, life insurance companies cannot pull some secret report about who you are and the life you lead-- the only information they know is what you provide to them. Being dishonest about your lifestyle or medical history can only in the long run hurt you as the consumer, and ultimately, your family if your payout is denied because of your omissions.

    With all that in mind, if you are getting ready to apply for life insurance and have concerns that your habits or health might limit your ability to be insured for a price within your budget, it's a great reason to make those lifestyle changes you may have been thinking about like quitting smoking or hanging up your skydiving parachute!

    The questions address a wide range of areas of health including sexual, mental, family medical history, and your personal medical history. Here is a sample of possible questions that might be asked on a medical survey:

    • Have you recently or ever been tested for HIV or Hepatitis B or C?
    • Have you ever tested positive for HIV or Hepatitis B or C?
    • Have you been exposed to the risk of HIV infection in the last 5 years by any of the following causes:
    • Unsafe sex?
    • Injecting a non-prescription drug?
    • Treatment with a blood product or transfusion?
    • Surgery outside the UK?
    • In the last 5 years, have you tested positive or been treated for any disease which was transmitted sexually?
    • Have you ever had any serious brain injuries or damage to your brain from conditions such as a hemorrhage?
    • In the last five years, have you had any ear-related disorders or eye disorders that were not correct by glasses?
    • Have any of your biological family (mother, father, brother, sister) been diagnosed or died from any of the following illnesses?
    • Heart attack?
    • Angina?
    • Stroke?
    • Diabetes?
    • Cancer?
    • Cardiomyopathy?
    • Multiple Sclerosis?
    • Myotonic (muscular) dystrophy?
    • Polyposis coli (Familial adenomatous)?
    • High blood pressure?
    • Polycystic kidney disease?
    • Motor neuron disease?
    • Huntington's disease?
    • Parkinson's disease?
    • Alzheimer's disease?

    Have you ever had any of the following illnesses?

    • Heart attack, angina, stroke or diabetes?
    • Cancer, Hodgkin's disease, lymphoma, leukemia or other malignant condition?
    • Diabetes or sugar in the urine?
    • Any neurological condition, for example multiple sclerosis, muscular dystrophy, paralysis, epilepsy or optic neuritis?
    • Mental illness that has required hospital treatment or referral to a psychiatrist?

    Have you ever sought medical attention and advice for any of the following in the past five years?

    • A tumor, lump or growth or any kind, or a mole or freckle
    • Chest pain, irregular heartbeat, raised blood pressure or raised cholesterol
    • Anxiety, depression, or any form of nervous, mental or eating disorder for which you have received any treatment
    • Any condition affecting your blood, for example anemia, sickle cell disorder or clotting
    • Any condition affecting your thyroid
    • Any condition affecting your lungs, for example asthma, bronchitis or sarcoidosis
    • Any condition affecting the skin
    • Any condition affecting your stomach, esophagus, liver, pancreas or bowel, for example colitis, Crohn's disease or hepatitis
    • Any condition affecting your kidneys or bladder, for example nephritis, urinary tract infection, blood or protein in your urine
    • Any condition or symptom needing a scan or other investigation of the heart, brain, or nervous system, for example angiogram, ECG, MRI, CT scan; or a biopsy; or investigation for which you were sedated

    Pre-existing medical conditions

    If you have a pre-existing condition or answer 'yes' to any of the medical questions as part of the application, there are four possibilities for your life insurance application:

    Acceptance/Accepted: There is a wide range of medical conditions that have no effect on life insurance acceptance or higher monthly premiums.

    Premium increase: There is a possibility that your medical or lifestyle history may require the insurance company to charge you a higher monthly premium to cover their cost of insuring you. If you find this amount does not fit into your budget, you may consider changing the type of coverage you desire.

    More information required: Depending on the issue, the insurer may want to have more information from you in order for them to make a decision. This could include a statement from your doctor, or in rare cases, a medical exam. After either of these, the insurer will then be able to decide if they will accept, deny, or charge you a higher premium.

    Refuse to cover/ Denial: It is possible to be denied for life insurance by a company if they feel it is too risky for them to insure the person due to their medical history. While this may be disheartening, it is advised to look into other possible insurers if you are denied because each company uses a different set of criteria to measure risk and health, so while one says "no", there may be others out there who will say "yes."

    It is important to note that there is life insurance available without answering medical questions or needing a physical exam. This is quite common with "over fifty" policies. Due to the age at the time of application, insurance companies know that the risk of your death during the term of the policy is much higher than an applicant in their twenties. Because of this, a medical questionnaire is not needed, but the company still protects itself by only paying out on the policy AFTER it has been active for two years.

    Another note about over-fifty policies: because of when they are taken out, these types of policies are essentially whole of life. The policy will pay out no matter when you pass away, as long as it is passed the two-year minimum. These types of policies are frequently used to help family members pay for the cost of your burial and funeral expenses. While these over-fifty policies can be more expensive than Life Insurance, they are a good option for individuals who may not pass a regular Life Insurance medical exam.

  • HI'm a smoker- can I still qualify for life insurance? aaa

    Smoking is definitely one of the biggest habits that can negatively affect your life insurance premium rate.

    Insurance companies usually classify anyone who has smoked or used a nicotine or tobacco product within a year (12 months) of their application as a smoker. In addition, if an individual routinely uses nicotine gum or other similar product as an effort to curb their smoking habit, most companies will consider you a smoker. If you omit this information from your application and at the time of your death it is revealed that you were in fact a smoker or user of nicotine products, the insurer can deny the payout to your family. It is beneficial to be honest about your smoking habits in your initial application then having repercussions, especially after your death.

    In the past few years, many individuals that are trying to quit smoking have turned to e-cigarettes as a way to curb their habit. The life insurance industry is divided on this trend. Before deciding which company to use for life insurance, it is important to know their policy on this issue.

    Of course, habits change over time, and it is possible (though not advisable) that a person who was not a smoker at the time of insurance application, could become one after the fact. If this happens and you were not a smoker at the time you took the policy out, then your new status as a smoker should not affect your existing policy. It is highly advised that if there are any major changes to your health or lifestyle, you should notify your insurer so they can keep it on file. This especially applies to the opposite circumstance- being a smoker at time of application, and then quitting after insured. If this happens, make sure to inform your life insurance company, as they will most likely lower your monthly premium if you have been nicotine and tobacco free for 12-18 months (depending on the company). So not only will you help your health by quitting, you'll help your wallet!

  • Life insurance with a terminal illness aaa

    There is life insurance available for those with a terminal illness, called 'terminal illness cover.' This type of coverage pays out when you are diagnosed with the disease. It is designed to help with the many expenses associated with a life-ending disease, such as helping with living and care expenses. Many people use the funds to pay bills, make advanced funeral plans, or even to go on one-last trip with family. All life insurance includes this coverage and provides financial benefits if a medical professional has given you less than a year (12 months) to live. Most insurance companies qualify a terminal illness as a sickness that has no known cure or the patient is ill beyond treatment and cure, with only 12 months of survival. In most circumstances, if you surpass the 12 months alive, the ailing individual is not expected to pay back the benefit paid out. Two other important pieces of information about terminal coverage is that if an individual has a joint policy, the terminal coverage can only be paid out once (to the surviving policy holder) and if the second policyholder also were diagnosed with a terminal illness, the terminal cover option would not be available. Finally, most term-life insurance policies do not have terminal illness coverage if an individual is diagnosed within the previous 12 months of the policy.

    Terminal illness coverage must be confirmed by your doctor, which will then be verified by your insurance company. Once the insurer has confirmed you are eligible for this coverage, they will pay out a one-time lump sum benefit to you. That amount is determined on your policy at the time of application and purchase.

    Terminal illness coverage is different from critical illness coverage. Terminal illness has the express timeline of less than 12 months to live attached to it. Critical illness coverage on the other hand, is paid out if diagnosed with a serious condition or disease covered by the insurance company. This critical illness coverage is an optional add-on to your life insurance purchase, whereas the terminal illness is part of all policies. Critical illnesses are determined by the insurance company and many of them are treatable, curable diseases.

Did you know ?

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