How does life insurance work?
Taking outfamily life insuranceallows you to protect your family members financially if you were no longer around.
If you die during your policy term, a cash payout will be made to your family members.
Many people perceive life insurance to be confusing, but it doesn’t have to be.
Life insurance works in four simple steps:
1. Application
2. Pay premiums
3. Claim
4. payout
Life insurance calculator
Calculate how much life insurance you may need by filling in the costs you'd like your policy to cover.
The amount of life insurance you need depends on your financial obligations and what you want to provide for your loved ones. A common rule of thumb is to have cover worth 10 times your annual salary, though your individual circumstances may require more or less.
Consider the following when calculating your life insurance needs:
- Outstanding mortgage balance
- Other debts and loans
- Income replacement for your family (typically 5-10 years of salary)
- Children's education costs
- Funeral expenses (typically £4,000-£10,000)
- Any specific financial goals for your dependents
For example, if you have a £200,000 mortgage, earn £40,000 per year, and want to provide 10 years of income replacement, you might need around £600,000 of cover (£200,000 + (£40,000 × 10)).
Use our free comparison tool to get personalised quotes from 50+ UK insurers, including How Does Life Insurance Work Uk, and find the right level of cover for your needs at the best available price.
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Life insurance policies
Your life insurance policy is essentially the contract of cover between you and your insurance provider.
It provides your family members with a cash life insurance payout if the worst were to happen to you.
In your policy, you’ll nominate beneficiaries who'll benefit from your payout upon death.
You’ll pay a monthly premium for your protection and will be covered for both natural and accidental causes of death.
it's advisable to ensure you're familiar with the terms and conditions of your policy to ensure it protects you against everything you require.
Typically, insurance policies in the UK are term-based or whole of life.
This means that your policy will either expire after a certain period of time (and a payout is made if you die during this time) or it will last until you die (guaranteeing a payout).
Keep reading to understand how each policy works…
Life insurance premiums
The amount you cover your premium will largely be based on your age, health, the amount of cover you want to purchase andhow long you want to be covered.
This information allows insurers to assess the level of risk you pose – the higher the risk, the more you’ll pay.
Your cover will remain in place as long as you keep up to date with your monthly premiums.
Failing to pay your life insurance premiums can lead to your policy lapsing and no payout being made upon your passing.
At LifePro we can secure cover from as little as 20p-a-day † .
