A guide to Life Insurance

What is life insurance?

Thinking about life insurance, and talking about it with our families, can be a difficult subject to broach.

But getting the right cover means that should the need ever arise; your loved ones will be looked after financially.

This simple but comprehensive guide will answer your questions and give you the confidence to make the right decision about life insurance for you and your family.

Knowing the mortgage on your family home will be paid, or there will be money to help your children fulfil their dreams, can be a hugely positive step, and like other forms of insurance, it gives you peace of mind.

What does life insurance cover?

A life insurance policy pays a cash sum to your loved ones if you die within the policy term.

Some policies, like TSB’s life insurance for example, include terminal illness cover which will also pay out if you are given a terminal diagnosis while covered by the policy and your life expectancy is less than 12 months.

This is not the same as a critical illness policy, which helps cover loss of income if you are unable to work for health reasons. You can add critical illness cover to your life insurance policy.

Life Insurance products which are introduced by TSB Bank plc are provided and administered by Legal & General Assurance Society Limited.

Who needs life insurance?

There are a range of reasons for taking out life insurance. If you have a young family, you may want to ensure they will be looked after financially if you pass away.

For a young couple buying their first home together, a surviving partner may no longer be able to afford the mortgage payments on their own.

Whatever your circumstances, think about what would happen if you weren’t here to cover your financial obligations, and how life insurance could help the people you love.

When should I get life insurance?

Many of us consider life insurance when we reach key milestones in life such as buying our first home, getting married and having children, and you should certainly explore your life insurance options at these times.

However, even if you have fewer commitments, life insurance could provide money to cover any debts or expenses, to make sure your final wishes can be paid for, or even a legacy for friends and family, such as nieces and nephews.

Does life insurance always pay out?

Life insurance pays out a lump sum should you die during the policy term. There may be some circumstances that are not covered, and you should always check your policy details carefully.

Some insurers may not pay out in cases of suicide within 24 months of the start of the policy.

And life insurance may not pay out if the cause of death is related to a pre-existing medical condition you did not inform the insurer about when you took out the policy. This is why you should always be honest and open about your health and medical history, and any other factors such as whether you are a smoker, when you apply.

Make sure you keep to the terms of your policy, including making all your payments.

97% of claims to Legal and General, TSB’s life insurance partner, were paid last year.*

How long does life insurance last?

There are two principal types of life insurance - whole of life, and term.

A whole of life policy pays out when you die, no matter your age, because of this premiums are more expensive.

As the name suggests, term insurance lasts for a set period, typically from five to 25 years, and only pays out if you die in that time.

You may choose a fixed term to cover you until your children reach adulthood, or your mortgage is paid off, or perhaps until your partner can start claiming their pension.

As your family will hopefully not need to make a claim, premiums tend to be lower than for a whole of life policy.

How much life insurance do I need?

You should make sure any payout would be enough to cover your commitments, whether that’s your mortgage, or your overall contribution to the family finances, plus any debts or other financial commitments you may leave behind.

If you are taking life insurance to cover a repayment mortgage, you could consider a decreasing term policy, where the potential payout reduces along with your outstanding mortgage balance. Premiums for a decreasing term policy tend to be lower.

You may also have potential death benefits from your employer, or your pension, so make sure you factor these into your calculations when you work out how much life insurance you need.

Can I get life insurance at any age?

You can take out a life insurance policy from the age of 18. The older you are, the more expensive it will be, and most providers have an upper age limit, typically 80, and a maximum term of 40 years.

Like all forms of insurance, the cost depends on the amount of cover, and the level of risk.

Generally speaking, premiums will be lower for younger people and for those who have no health issues, as there is less likelihood of a claim.

TSB offers life insurance from Legal and General, which starts from £6 a month. Find out more here.

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