What is life insurance and is it important to you?

How can you make sure your family and loved ones are protected if you pop your clogs, push up daisies, or kick the bucket? You could befriend an eccentric billionaire who may step in to support your family once you’re gone. Failing that, life insurance is a more reliable option. But what is life insurance and what does it provide? Our handy guide has the answers.

What is life insurance?

Life insurance is cover that you (‘the policy holder’) pay for so that if you die while you have the policy (or are diagnosed with a terminal illness, in many life insurance policies), the insurance provider will pay a sum of money which will help your loved ones cope with ongoing financial responsibilities.

It can be used to cover the cost of your family’s lifestyle, such as paying rent and other essentials, and can be used to repay any money you owe, such as, a mortgage or credit cards. It can also cover funeral costs.

It’s a protection against the worst eventuality, that gives you peace of mind that your loved ones will have the crucial financial support they need if they lose you.


How life insurance works

Getting life insurance isn’t as complicated as you might think. Here’s what happens:

  1. You choose the amount of cover you need and how long you need it for.
  2. You pay a regular monthly amount (these are called ‘premiums’).
  3. The amount of cover will be paid out if you die during the policy term or, if offered by the provider, are diagnosed as terminally ill (subject to terms & conditions).

The amount you pay as a premium depends on a lot of factors, including how much cover you want, how long you want it for, your age and your state of health. Certain lifestyle choices also have a big impact on how much you pay, for example, if you smoke then you will pay a lot more for life insurance compared to someone who does not smoke, all other things being equal.

Do I need life insurance?

If you’re not sure whether or not life insurance is important, it’s a good idea to take stock of your current lifestyle, finances, and who would be affected if you were to shuffle off this mortal coil.

This isn’t a happy thought by any means but taking the necessary steps now to support your family should the worst happen is the best way to care for and protect them financially in the future.  

What type of life insurance do I need?

There are various types of life insurance on the market, which might seem daunting, but it’s actually very simple.

The two most common types of life insurance are ‘Whole of Life Insurance’ and ‘Term Insurance’:

Whole of Life insurance pays out your chosen lump sum when you bought the policy when you die, whenever that is. There is no end date for the policy and you need to continue to pay premiums until your death for the policy to pay out. This is the more expensive option.

Term Insurance pays out the lump sum you selected if you die within the term of cover that you have chosen. For example, you may have chosen to match the term to the number of years you have left on your mortgage.

With a term insurance policy you’ll need to decide upon the amount you would  need to be paid out if you were to die during the policy term, whether that should be a one-off lump sum or paid as an income, as well as how long you’ll need it in place. If you want to provide for your family with a regular income, you can look at your monthly outgoings and think about additional future costs to work out a suitable figure.

 

Who benefits from life insurance?

When you take out life insurance you need to consider who will receive the lump sum. If you are diagnosed with a terminal illness, and are covered for this, you will receive the lump sum and the cover will finish. If you die you will not benefit financially from your insurance policy directly, and the most likely recipients will be your spouse, partner, children or other dependents. If you have written a will, the lump sum is likely to go to whoever you have chosen.

When’s the best time to get life insurance?

When deciding the best time to get life insurance, there are a number of things to consider including taking account of your financial commitments, dependants, and your stage of life.

  • Financial commitments

If you’ve borrowed money to buy your home, a life insurance pay-out could help your family pay off the mortgage after your death. Similarly, credit card debt, unexpected funeral expenses and estimated future costs for your family’s lifestyle can all be accounted for.

  • Dependant family

If you have a dependant family, particularly with small children, it could help provide them with a regular income. This may cover your monthly outgoings and help them continue to pay bills, buy the usual necessities as well as maintain their lifestyle.

  • The sooner, the better

Most people think about life insurance as soon as they have dependents who rely on them and their income. If you are starting your journey in life with a young family, a mortgage to cover and children to get through school, it’s important to consider what would happen if there was a sudden loss of income.

You’ll also find that the younger you are when you take out life insurance, the more likely you are to get a better deal in the long run because if you choose a level term policy then your premium remains the same for the duration of the policy. There are many factors that come into play but in general, the younger you are when taking out a policy, the more likely you are to be in good health for the length of term you need cover for as opposed to taking out the policy later in life. And that’s true even over the course of a policy lasting several decades.

Why choose reviti?

  • We offer Term Insurance for people between 18 and 80 years old (subject to terms and conditions). If you're within the age range when you buy your insurance, you can keep your cover until you're 85.
  • Up to £750,000 cover depending on your age when you take out cover.
  • Level or decreasing term available depending on what you need to cover
  • Benefit from lifestyle and wellbeing support in the reviti life app.
  • We’ll give you a discount of up to 50% off your premium when you have quit tobacco and nicotine altogether for 12 months, or if you abandon smoking as a reviti customer we’ll give you a discount of up to 25% off your premiums if you switch exclusively to a science-backed smoke-free alternative (currently, the IQOS tobacco heating system) for 3 months or more.
  • We’ll give you a discount of up to 15% off your premiums if, in the past 12 months or more, you have either only used e-cigarettes, or have used e-cigarettes only in combination with the IQOS tobacco heating system. These e-cigarettes must comply with the safety rules and requirements brought in by the 2014 Tobacco Products Directive.

Get a free quote

Get a no commitment life insurance quote in as little as 1 minute.

Get a quote