Life Cover

Almost every policy we arrange takes one of three shapes.

Level term

The sum assured stays the same throughout. Take £300,000 over 25 years and it is £300,000 in year one and in year twenty four. It suits family protection or an interest only mortgage, where the need does not shrink.

Decreasing term

Cover falls over the term, roughly in line with a repayment mortgage, so it costs less than level term for the same starting sum. Good against a repayment mortgage, poor against anything else, and plenty of people hold it when they needed the flat amount.

Whole of life

No end date. It pays out whenever you die, for as long as premiums are maintained, and that condition is not small print. Whole of life is normally used against a liability that will not go away, most often an inheritance tax bill. Ask whether the premium is fixed or one the insurer can reassess later.

A couple can take joint life first death cover, which pays once, on the first death, and then ends. Or they can take two single life policies. Joint looks cheaper on a quotation and for a mortgage it can be perfectly reasonable.

Two single policies pay out twice if both people die, stay in force if the couple separates, can be written in trust separately, and can be set at different amounts if the incomes differ. The extra cost is often small, so we price both rather than assume.

Most life policies pay one large cheque, which is not always what a household needs. Someone left with a seven figure sum and three young children has an investment decision to make at the worst possible moment.

Family income benefit pays a set amount each year instead, from the date of claim to the end of the term. On a twenty year plan paying £30,000 a year, a claim in year six pays £30,000 a year for the remaining fourteen. Because the insurer’s liability falls as the term runs down it is usually inexpensive, and it replaces what it stands in for, a salary.

If one point on this page is worth acting on, it is this. A policy that is not in trust normally forms part of your estate when you die, and two things follow.

First, the payout can be counted for inheritance tax. Above the available nil rate bands the excess is taxable at forty per cent, so a £400,000 policy bought to look after a family can hand a large slice of itself to HMRC. A policy written in trust sits outside the estate and is generally not taxed that way.

Second, money in your estate cannot be released until probate is granted, which routinely takes months. A trust names the beneficiaries in advance, so the insurer can pay the trustees directly once the claim is admitted, often within weeks. Bills do not wait for probate.

It is usually a short form from the insurer, it costs nothing, and it can be done at outset or later. It is not right in every case, so raise it with us first.

An application asks about your medical history, alcohol, smoking, weight, occupation and any hazardous pursuits. Insurers rarely verify it up front. They verify it at claim, when your GP records are requested.

If something material was not disclosed, the insurer can reduce the payout, decline it and return the premiums, or void the policy outright. People rarely lie. A symptom mentioned to a GP years ago gets forgotten, or someone decides an occasional cigarette does not count. Tell the insurer everything and let them decide what matters. An undeclared condition can cost the whole claim.

• Your age at the start, which is the biggest factor by some distance.
• The amount of cover and the length of the term.
• Whether you use nicotine, which usually moves the price more than anything else on the form.
• Your health, family history, height and weight.
• Your occupation and any pursuits such as diving or motorsport.
• Whether the plan is level, decreasing or whole of life, and whether critical illness has been added.

We are not tied to one insurer, so where one company loads a premium for a health condition another may not. The right insurer often beats the cheapest headline rate.