• Life Insurance FAQs

  • On my journey as an insurance agent and blogger, I have been trying to help people understand how life insurance companies and insurance providers work. During this time I came across thousands of different questions. It would take me far too long to write it all down in this LIFE INSURANCE FAQs section, so I only picked out a portion of those that appear the most searched for in the insurance industry. To understand how life insurance policies work, I would recommend you to visit also my Life Insurance Tips&Tricks section, and for you to read my Genius James Life Insurance Blog, where I provide help on how to save money on Life Insurance, get best family protection, secure your mortgage, transfer family wealth, as well as plenty of other helpful and hidden futures in the life insurance industry.  

    What Happens if I Miss a Monthly Premium Payment?

    Most policies have a 31-day interest-free grace period, but the insurance company will usually terminate the policy if you do not make the payment within this period. 

    How Much Life Insurance Do I Need?

    Calculate your monthly expenses, mortgage payments, education, retirement funds, contracts, and medical bills. Then calculate your investments or income that comes in every month. Consider all costs on one salary, and then calculate the financial shortfall. That is a rough guide of how much life insurance you need.

    Can I Buy Multiple Life Insurance Policies?

    Yes, that is possible if you want to supplement your current policy from work or add another term life insurance because you have a new child.

    What is level term life insurance?

    Level term life insurance pays out a fixed lump sum amount if the policyholder passes away within the term agreed to in the policy. Because the amount payable is known beforehand, planning is simplified for you and your beneficiaries.

    What is decreasing term life insurance?

    Decreasing term life insurance is a policy that pays out less over time. It can be used to cover the balance of a decreasing debt (like a repayment mortgage).

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    What is a term plan in life insurance?

    A term plan life insurance policy offers protection for a predetermined period of time (known as a term) and pays out a lump sum to the beneficiaries of the policy in the event of the policyholder's death, should that death occur within the term specified.

    What's the difference between level term and decreasing life insurance?

    With a level term life insurance policy, your beneficiaries will receive a pay out if you pass away with the term. For a decreasing term life insurance policy, the cash pay out will reduce throughout the length of the policy in line with decreases in debt repayment (usually a mortgage).

    Can you borrow from a term policy?

    Term life insurance premiums are lower than permanent policies because they don't have cash value. You can't borrow against them, and if you surrender the policy, you won't receive any cash.

    What is a guaranteed over 50s plan?

    A guaranteed over 50s plan is a form of life cover that, after a specified period of time, will provide a fixed cash sum upon your passing. The fixed cash sum, as well as your premiums, will stay the same for the entire duration of the plan, and the plan will continue for the whole of your life if premiums are up to date when they are due.

    What is the difference between life insurance and over 50s life insurance?

    Both life insurance and over 50s life insurance covers existing customers for the duration of their life come with fixed premiums and a fixed cash pay-out; however, over 50s life insurance plans are only open to UK residents over the age of 50. Over 50s life insurance comes with guaranteed access, even without a medical; whereas life insurance may require a medical exam or for the applicant to answer medical screening questions. 

    Who qualifies for an over 50s policy?

    Anyone who is aged between 50 and 80 and a UK resident can apply for an over 50s policy. There is no medical examination or other tests required. 

    Is Over 50s life insurance regulated?

    Over 50s life insurance firms are regulated by the Financial Conduct Authority. FCA oversees these firms and their behavior and looks after the broader integrity and conduct of the UK’s financial markets. 

    Can I get critical illness cover after the diagnosis?

    You can apply for critical illness insurance at any time, regardless of your diagnosis. However, critical illness insurance policies are underwritten, and you will be asked to disclose your current and past medical conditions. This may affect your premium or acceptance by the insurer.

    Do I need life insurance for a mortgage?

    Most banks and lending institutions require that you obtain life cover in order to qualify for a mortgage. The good news is that you can apply for decreasing cover that is reduced as you pay off your mortgage over time.

    What is mortgage insurance protection?

    Mortgage insurance protection (MPPI) is a form of insurance that will cover your monthly mortgage payments should you become unable to work due to redundancy or illness.

    What is Life Insurance:

    Life insurance is a financial contract drawn up between you (the policyholder) and an insurer. As the policyholder, you insure your life by paying monthly life insurance premiums. The life insurance cover ensures that your nominated beneficiaries are paid a lump sum of money upon your death. 

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    Do I need mortgage protection insurance?

    Yes, homeowners that are still repaying their mortgage will benefit from MPPI policies. If you are self-employed or suffer from a pre-existing condition that might lead you to become seriously ill in the future, you may also consider an MPPI policy.

    Is mortgage life insurance PPI?

    Mortgage insurance is different to payment protection insurance, even though PPI is often designed to cover repayments like your mortgage costs if your personal circumstances leave you unable to meet your obligations. The primary difference is that mortgage protection insurance is usually paid to you directly, whereas payment protection insurance is usually paid directly to the lender and also cover unsecured finance (and not just your mortgage repayments).

    Is mortgage protection the same as life insurance?

    Not exactly. Mortgage protection is designed to cover your monthly mortgage payments if you become unable to work; life insurance is paid out as a lump sum in the event of your death. Mortgage protection insurance can be compared to term life insurance, but the protection goals are different.

    What is SMI?

    SMI or Support for mortgage interest is a loan paid by the Department of Work and Pensions to assist homeowners with their mortgage. It can only be used to cover the interest on your mortgage (up to the first £200,000) and needs to be repaid, with interest, when the home is sold. If the sale does not cover the loan amount, the outstanding amount is usually written off. Homeowners need to be on qualifying benefits to obtain this loan.

    What is MPPI?

    MPPI is the abbreviation used for Mortgage payment protection insurance, a form of insurance cover that helps the policyholder make their monthly mortgage repayments for a specific term if they should be made redundant or become incapacitated.

    What does whole-of-life insurance mean?

    Whole of life cover is a life policy that provides your family or friends with a lump sum cash amount in the event of your death, no matter how long you live after acquiring the policy.

    What are the disadvantages of whole life insurance?

    Unless the policy is written into a trust, inheritance tax does apply to whole of life insurance if the total estate is above a certain threshold. Whole of life insurance is also more expensive than other forms of insurance.

    Are whole-of-life policies worth it?

    Most people who choose whole of life insurance are attracted by the guaranteed pay-out, which ensures that your loved ones receive a fixed amount in the event of your passing. You can also opt for whole of life insurance options that have an investment or form of equity called life assurance attached to it as a separate benefit. Is whole of life insurance worth it? It depends entirely on your goals, so speak to your insurance advisor about the options.

    What does income protection cover?

    Short-term income protection will cover you for accidents, sickness and unemployment if you are unable to work for a specific period of time (e.g. six months to one year). Long-term income protection will cover you against accidents or illness, but not unemployment.

    Is income protection tax deductible?

    If you are an employer that provides income protection insurance, it is completely tax-deductible. If you are an employee, your payout is taxed via PAYE. If you make a claim, your payouts are tax-free because they would have been covered by pay-as-you-earn taxation.

    Did you know:

    It may seem that life protection is something quite new, but in fact, it is almost 4000 years old!
    The first form of insurance policy can be found as far back in history as 1750 BC, carved on a Babylon monument with the code of King Hammurabi etched in it.
    More about Life Insurance History can be found under the blog section HERE.

    Genius James Advice:

    "Backdate your policy to save money".

    One of my tricks, that can be found in Tips&Tricks section.

    What is the difference between income protection and ASU?

    Income protection usually refers to long-term income protection insurance that pays a monthly percentage of your regular income to you until you return to work or retire. ASU (Accident, Sickness and Unemployment) cover is typically a form of short-term income protection insurance that will pay a percentage of your income for a limited period of time.

    What's a deferred period?

    A deferred period refers to the period of time between the first day that you are unable to work and the date of your first payout. The longer your deferred period is (4, 8, 13 or 26 weeks), the cheaper your premiums will be.

    What does critical illness insurance cover?

    The number of illnesses covered by a critical illness policy can vary from insurer to insurer. Some cover as many as fifty conditions; others cover fewer than ten. Most insurers will cover conditions like heart attacks, strokes, specific types of cancer, Parkinson's and Alzheimer's disease etc. You may also add specific conditions that you would like to be covered at an additional cost.

    What is critical illness?

    Critical illness refers to so-called dread diseases or serious injuries that are long-term and serious in nature and may prevent the sufferer from working for an extended period of time. It does not include terminal disease.

    Can you get life insurance with HIV?

    Yes, you can obtain life insurance if you have been diagnosed with HIV. Individuals with HIV now have the same life expectancy as most people without the condition. If you are applying for coverage through your employer or union, you won't necessarily have to disclose your HIV status, but you will need to disclose your status if you are applying as a private individual.

    What is terminal illness cover?

    Terminal illness cover is usually included in your life insurance policies at no extra cost. A cash sum is paid out when the policyholder is diagnosed with a disease where their life expectancy is less than 12 months.

    Will my children be covered if I choose to add Critical Illness Cover?

    Your children can be added to your critical illness cover policy, usually at no additional cost. Your children will be covered for the same illnesses and conditions as you. You may also add additional child-specific illnesses to the cover if you prefer.

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