Why do I need life insurance?
Why do I need life insurance is one of our most frequently asked questions. There are many different reasons why people take out a policy.
Life insurance is for people with a business or dependants who wish to leave money behind. It can help the business, your loved ones or both to be financially protected in the event of your death. The payout can be used for whatever your loved ones need. It can be used as income, to pay debts a loan or the mortgage or to keep your share of a business within the company. The purpose of a life insurance policy is to provide financial protection when you can’t.
What type of life insurance policy do I need?
Business life insurance isn’t as straightforward as a personal policy. The type of life insurance policy you need will depend on your individual circumstances along with what you intend to happen with the money. For more information, visit our pages on key man insurance, relevant life cover and shareholder protection. Alternatively, you can contact an advisor for help.
Can I get life insurance online?
There are some companies that advertise an online life insurance quote. Relevant life insurance, key man insurance and business life insurance policies are advised products, unlike a personal life insurance policy.
Therefore, our advisors will need to determine your specific requirements to advise you on the right products.
Life insurance needs to be underwritten based on your age, health, medical history, family medical history and other lifestyle factors such as smoking. Each individual is different. In addition to this, every business owner, director or employee may have a different purpose for the insurance.
In order to provide proper guidance and find a policy that suits your requirements, our insurance advisors will need to speak with you. It’s a short process but it helps us to determine your needs. This allows our advisors to provide qualified and informed advice and quotes.
How much life cover do I need?
How much life insurance coverage you require will depend on your individual circumstances. If you’re a business owner looking to cover a loan, then the value of the debt plus interest is a good place to start. Furthermore, if you’re looking to protect a business share you can value the share and include inflation rates. For loved ones, you can include the cost of your mortgage, lost income, childcare and any other outgoing expenses to calculate how much cover you will need.
Which insurance provider should I choose?
It’s up to you which insurance provider you choose based on the quotes and recommendations made by your advisor. We provide you with quotes from a selected number of reputed companies in the UK. You may choose an insurance provider due to the cost of the premiums. Alternatively, some providers may provide a higher coverage amount or more comprehensive cover that may suit your needs better.
Can I change my policy once I’ve purchased it?
Once your life insurance policy is in place, it can’t normally be changed. If you wish to take out a different policy, we could help you cancel your existing policy and take out another one from a different provider.
Who should I choose as a beneficiary?
If you are putting your life insurance policy in a trust, you will be required to choose who you would like the money to go to. Your beneficiaries can be anyone you intend the money to go to. It could be a partner or spouse, your children or it could be a business partner.
I’m self-employed – what business life insurance can I get?
If you are a sole trader or self-employed you may be able to obtain key man insurance. This type of policy helps to protect your business and family. Money is paid back into the business, which would fall into the estate. It can be used to cover any debts, cover lost income for your family and aid with the closure of the business.
Can I get life insurance through my limited company?
Yes. Relevant life insurance is a life insurance policy that is paid for by the business and the money goes to your loved ones. There must be an employer-employee relationship to obtain this type of policy. The premiums can often be run through as an allowable expense for the business to claim back tax. In addition to this, income tax and national contributions are not subject to be paid.
How long do I need cover for?
The amount of time that you take out a life insurance policy for will depend on the purpose of the policy. For example, if the policy is to cover a loan or a mortgage then usually the term would be the same as your lenders. However, if the policy is to protect your family, you may decide to take a policy out until you retire, until your children have grown up or until you increase your savings.
Will I need to get a medical check?
With life insurance, you will always need to answer health and medical questions for the life insurance provider to determine the level of risk you pose. If you are fit and healthy, it is unlikely that you will need to have a further medical check. However, in some cases, you may be required to get a medical check. Usually, this is because you are getting a high amount of coverage, or you have disclosed a medical condition on your application.
What happens if I have a pre-existing medical condition?
When you have a medical condition that you have declared on your life insurance application, the underwriter will look at your information and decide how much risk you pose. In some instances, a GP report or medical check is required. For some people, you will still be able to obtain standard rates. For others, your premiums may increase, or, in more serious cases, you may be unable to obtain cover. Some insurance providers will add an exclusion onto the policy, where they won’t pay out if you were to pass away for reasons associated with the existing condition.
Can I get life insurance to cover a loan?
Yes. When you take out a loan, you are able to get a life insurance policy so that the debt can be paid if you were to pass away. You can take a term-life insurance policy out until the loan is repaid.
Will I have to pay tax on my life insurance?
It depends what type of life insurance policy that you take out. Some policies such as relevant life cover and key man insurance may come with tax relief. Other policies such as shareholder protection or partnership protection do not. It’s always best to check with your local tax inspector if you are unclear of the tax treatment of your life insurance policy.
Do I need critical illness cover as well?
A lot of our clients opt to take out a critical illness policy alongside their life insurance policy. Critical illness cover pays out if you are diagnosed with one of the life insurance providers critical conditions such as a heart attack, cancer or stroke. It is designed to cover lost income or additional costs associated with having that illness.
If you have substantial savings, you may be able to survive financially. Critical illness cover can provide financial security if you are unable to work for a long period of time. It allows you to spend more time recovering and less time worrying about finances.
What happens to my employer-paid life insurance if I leave?
If you have a life insurance policy that is paid for by your company, you may be able to transfer it to your new policy. A relevant life plan can be transferred to your new employer if they are happy to pay for the premiums. You may also be able to transfer the policy to a personal policy. In this instance, the policy loses its tax advantages, so the premiums may be a little higher. However, it means you take ownership of the policy and do not lose your life insurance.
How long does it take to set up a policy?
Once we’ve determined your needs and received your health and lifestyle questionnaire, we can provide you with accurate quotes on your life insurance policy. All we need from you is the go-ahead and we can apply for your life insurance policy straight away. In some cases, your life insurance policy will be active that day. For others, it can take up to a few weeks if medical checks are required or the policy needs to go into underwriting.
What affects the cost of my life insurance premiums?
The cost of your life insurance premiums is based on your age and health. The insurance provider will also take into consideration your family medical history, whether you smoke, your alcohol intake, your BMI and if you take part in any extreme sports, as well as how much cover you will be taking out and for how long.
I’ve stopped smoking, can I get cheaper life insurance?
If you are able to stop smoking for 12 months or more, you may be able to obtain cheaper premiums on your life insurance. We can notify your insurance provider, so they can re-calculate your premiums to see if you can get cheaper life insurance. Although, there is no guarantee that this will be possible.
What is indexation?
If you have an index-linked life insurance policy, it means that your insurance cover is adjusted based on inflation rates. Your life insurance cover will change based on changes in the economy and inflation so that the value stays the same. Please bear in mind that your premiums will also rise at the same rate.