Life Insurance Types

A brief overview of the different types of life insurance available in the UK

Life Insurance Types

A brief overview of the different types of life insurance available in the UK

There are a number of different types of life insurance types available to choose from. Before deciding which could meet your needs, consideration must be given to your overall situation and requirements.

These are the most common life insurance types in the UK:

Level Term Assurance

  • These plans pay a given lump sum upon the death of the insured person within a given term. The benefit can be index linked to keep pace with inflation.

Decreasing Term Assurance

  • These plans pay a reducing amount over a given term. They are often linked to loans which are being repaid.

Mortgage Protection

  • These are almost identical to decreasing term plans except they often include a guarantee that they will pay off a mortgage loan at any point during the term as long as the interest rate charged has not exceeded a certain amount. See also our Mortgage Protection Plans page.

Family Income Benefit

  • One of the lowest cost life insurance types this provides a yearly income, paid monthly for the remainder of a given term if a parent dies. See also our Family Income Protection. page.

Critical Illness Cover

  • This pays a lump sum if you are diagnosed with a qualifying serious or ‘critical’ illness. These include heart attacks, cancer, stroke, heart bypass surgery, comas, total permanent disability and kidney failure. Some insurers are moving to ‘severity based’ cover meaning you can get a part of the sum insured for less severe instances of  illness.

Whole of Life Insurance

  • These plans are designed to give life cover for the rest of your life, as long as you pay the premiums. The premiums rise as you get older, often following annual or five yearly reviews. The rises are uncapped. Part of your monthly premium pays for the life cover and a part goes to an investment pot. As the pot grows, it can later be used to reduce future premium rises. If the pot runs out, premiums will go up. See also our What Is A Whole Of Life Insurance Plan? page.

Income Protection

  • This is designed to replace your income, or a proportion of it, if you are unable to work through illness. Restrictions on the maximum cover available apply – insurers do not want to give reason to stay off work longer than necessary. See also our Income Protection page.

Accident, Sickness and Redundancy

  • Another form of income protection for mortgage holders is an Accident, Sickness and Redundancy plan. This pays an income for a short period, usually 12 or 24 months, in the event of illness or being made redundant.

Often a life insurance solution will involve a number of these types. Some insurers offer a flexible multi-plan where different types can be built in and changed in the future as required.

You may come across other names for different life insurance types but they are usually variations of these main categories. For example many people hold ‘Endowment’ plans with life cover built in, but this simply uses a decreasing term assurance feature to top up the investment value of the plan to guarantee a certain level of life cover.

Please use the ‘Contact Andy’ form below to ask any questions about life insurance and income protection, or to arrange a no-obligation meeting to discuss your requirements.

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