If you’ve ever headed online to ask a search engine a question about life insurance, you’re not alone. New research published by Cover has revealed that tens of thousands of Brits head to Google every year with questions relating to protection.
According to Cover the research, which is all based on Google searches, “shows the depth of understanding gap on life insurance in the UK”.
The most commonly searched question has 10,000 annual searches, with the rest of the top five all seeing hundreds of searches every month. Here are the five most common questions Brits are asking about life insurance, and the answers you need.
1. How much life insurance do I need?
The Times recently reported that almost half of UK adults are more motivated to get cover because of Covid-19. So, when heading online to do their research, the most common question Brits ask Google is “how much life insurance do I need?”
The amount of life cover you need depends on a range of factors, including:
Your debts and how much you owe
What would you like to be paid off in the event of your death? For example, if you have a mortgage, leaving a lump sum to at least pay off your mortgage debt is a good idea.
If you have other debts, such as loans or credit cards, you may also want to ensure these can be repaid if you die.
Your dependants and their ages
Once you have covered your dents, it’s time to think about the people who depend on you financially.
How much would you need to ensure your family could maintain their lifestyle if you were no longer around? While repaying your mortgage is important, you may also want to cover the cost of childcare and leave enough for your family to pay their regular bills.
The Child Poverty Action Group (CPAG) calculates that it costs more than £150,000 for a couple to raise a child from birth to age 18 – so you might want to think about making sure you leave enough for your children. Read more about the costs of raising a child on our blog.
How much you want to leave behind
Would you need to replace your income for an extended period? Are there other costs that you’d like to meet if you’re no longer around – for example, school and university fees for your children?
If you would like to leave a legacy to your loved ones, then you’ll need to consider this when working out how much life insurance you need.
If you want to work out how much life insurance you need, our online life insurance calculator can help you.
2. Do I need life insurance for a mortgage?
With more than 9,000 searches every year, “do I need life insurance for a mortgage?” is the second most common Google search relating to life cover.
While it is not generally compulsory to take out life insurance when you apply for a mortgage, experts will strongly recommend that you have life insurance in place to ensure the debt can be repaid in the event of your death.
If you have a capital and interest (repayment) mortgage, then the cheapest option is typically “decreasing term insurance” (sometimes called “mortgage protection”).
Here, the amount of life cover reduces over the term of the policy in line with the reducing amount you owe on your mortgage. It’s designed to pay off the outstanding balance if you die within the term.
If you have an interest-only mortgage, or you want to provide a fixed level of cover throughout the term, then you might want to consider “level term insurance”. This pays a fixed amount if you die within the policy term – for example, £200,000 over 25 years.
3. What does life insurance cover?
With more than 8,000 Google searches, “what does life insurance cover?” is the third most common life insurance related search in the UK.
In general terms, life insurance is designed to pay out a lump sum to your beneficiaries if you die within the term of the policy (or on your death for a “whole-of-life” policy).
Term insurance is designed to pay out a lump sum if you die within a fixed policy term and can be taken out on a “level” or “decreasing” basis. It’s generally the cheapest way to arrange life insurance.
Whole-of-life insurance is more expensive as it is not time-limited. It guarantees to pay out a lump sum on your death – whenever that is. Some people take out small whole-of-life policies for specific expenses such as funeral costs.
Some life insurance policies also include “terminal illness” cover. If you are diagnosed with a terminal illness – something with no known cure, or an illness that has progressed to a point where you can no longer be cured and is expected to lead to death within months rather than years – the policy may pay out on diagnosis rather than death.
Examples of terminal illnesses could be advanced cancer or heart disease.
Many insurers will also allow you to include Critical Illness cover with your life insurance policy. This is designed to pay out a lump sum on diagnosis of a serious condition such as a stroke, heart attack, or some forms of cancer.
Note that a combines life insurance and Critical Illness policy will typically only pay out once. It won’t generally pay out on diagnosis of a serious illness and then again on your death.
4. Can I have more than one life insurance policy?
Yes. Many advisers will recommend taking out a basic life insurance policy to cover your mortgage, then look into additional cover for your other needs – for example, to support your family.
When considering how much life cover you need, you should think about any other life insurance cover you may have. This could be a small policy you took out some years ago that you may have forgotten about, or you may get cover through your employer, as a “death in service” benefit.
You can hold several life insurance policies, and this can be a good way of ensuring that specific needs are met when you die. You could have one policy designed to repay your outstanding mortgage, and one to provide support to your family.
5. Life insurance for parents
As we saw above, the CPAG say that it costs more than £150,000 for a couple to raise a child until the age of 18. So, if you want to ensure that your children get the best start in life if something happens to you, life insurance for parents is vital.
It’s not just the main wage earner that needs life insurance. If you are part of a couple where one of you earns less than the other, perhaps because one of you is looking after your children, it’s still important to take out enough cover for both of you.
If the partner looking after children passes away and there are young children, you could incur significant childcare costs, and so you need to take this into account.
Get a life insurance quote now
If you’ve found the answers to your most common life insurance questions, now’s the time to put the appropriate protection in place.
We work with dozens of the leading life insurers in the UK and so we can find you the best price for the life insurance you need. Our experts can also help you get the cover you need – for example, if you have pre-existing medical conditions.
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