Life insurance FAQs

What if I've got life cover under my pension scheme?
You may find that if you have a company pension or personal pension, life assurance is provided. This would mean a lump sum is payable should you die before normal retirement date. With a company pension scheme you may find the level of life cover is expressed as a multiple of your salary. Some employers will only provide this cover after you've been employed for a certain period. Personal pensions often pay out the value of the fund on death before retirement. You should check the benefit provisions of your pension scheme before deciding how much additional life assurance is required.

What will I get back when my policy stops?
If you have a term assurance or family income benefit plan, nothing will be payable to you at the end of the policy term. These policies are designed to provide low-cost protection and pay out only on death. They don't have any investment or savings element at all and so don't have any cash-in value.

Can I have a joint policy that covers me and my partner?
Yes, it is possible to have joint policies that will pay out if either person is to die during the term of the policy. For a whole life policy being used for inheritance tax planning, cover would usually continue after the death of the first person, with benefits being paid on the death of the second person.

How can I be sure of the costs? Each life assurance company has to decide whether or not you are an acceptable risk. On the proposal form you fill in, they will ask questionsabout your state of health, whether you smoke or not and family medical history. Your answers determine what premiums will be charged for the cover you need. Life assurance companies may request further information from your Doctor or ask you to undergo a medical if they feel it's necessary, even so it may not mean you have to pay higher premiums.

What happens if I stop paying the premiums?
With most life assurance policies if you stop paying your premiums the cover will cease. If you then want to start the cover again, you will probably have to set up a new policy and you would need to provide current medical details. You may also find your monthly premium has changed. Many whole of life policies allow premiums to stop for short periods, this is known as a "premium holiday". Whole of life cover and endowment assurance plans have an investment element, so a cash-in value or surrender value may build up. In the early years, any surrender value might be lower than contributions paid in.

What about tax?
Death benefits will normally be free of income and capital gains tax. Upon death the proceeds will normally form part of your estate and may be subject to inheritance tax. You can set your life assurance cover up under trust: payment on death would then be made to the trustees and under current legislation would not form part of your estate for inheritance tax purposes. Expert legal advice should be considered in more complex situations.