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How Does Life Insurance Work? Simple Steps To Secure Cover

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Thinking about what will happen to your loved ones if the worst were to happen and you were no longer around is often a thought that we don’t bear to think about but it’s one that should be carefully considered.

Life insurance is a cost-effective way to secure the financial future of your loved ones and ensure that money will be the least of their worries at an already stressful time.

But how does life insurance work?

Many perceive the experience of taking out life insurance to be a stressful one, but it doesn’t have to be. In fact, the process of securing cover can be narrowed down into 4 simple steps.

Step 1: application

The first step in obtaining life insurance is the application process. Here you’ll outline the amount of cover you require (your sum assured) and how long you’d like your cover to last (policy length)

How long you’d like your cover to last will often determine the policy type you’ll choose.

For example, if you’re only looking to be covered for a specific period of time (to cover a mortgage or until your children are financially independent) it’s likely you’ll choose term life insurance. If you’re looking for lifetime cover, you’ll choose whole of life insurance (or an over 50s plan if you’re aged 50 – 85).

During the application process you’ll also be asked some health and lifestyle questions. This is to help insurers determine the level of risk you’ll pose. These questions will typically ask about your medical history and your smoking status.

Once insurers have all this information, they’ll be able to calculate your premium. This will need to be paid monthly to keep your cover in place.

Step 2: pay your premiums

As mentioned above, in order to keep your cover in place you’ll need to keep up to date with your premium payments.

With term life insurance, you’ll need to pay your premium for the duration of the term (this can be up to 40 years), or until you pass away. With whole of life insurance, as cover lasts for life, you’ll continue to pay your premiums until your dying day.

The price you pay for your premium will be worked out at the point of application and will be based on personal factors such as your age, health and whether you’re a smoker.

The greater the risk in the eyes of the insurer, the more you’ll pay for your premium. This is because the likelihood of a pay out increases. 

If you fail to keep up with your payments, your cover will lapse.

Step 3: make a claim

If the worst were to happen and you were to pass away during the term of your policy, your loved ones will be able to make a claim on your life insurance policy.

Claims can be made by contacting the life insurance provider and they’ll be able to talk your loved ones through their next steps. This will most likely involve filling in a claims form.

Once the claims form has been sent back and accepted, the pay out process can begin.

Step 4: receive a pay out

After the insurance company has received a valid claim, your loved ones will receive their pay out to a UK bank account.

This pay out can be used to help ease any financial difficulties that might arise due to your passing. For example, it can pay off the remainder of your mortgage, fund family living costs, pay for your funeral or it can simply be left as inheritance for your loved ones to enjoy.

Whatever your financial needs, you’ll have peace of mind that your nearest and dearest won’t be struggling at an already overwhelming time.

How can you secure cover?

You can obtain a life insurance policy directly from any life insurance provider, through a comparison site or through an FCA registered broker service.

Going direct means you won’t get to shop around to save money. Whereas using a comparison site will allow you to see offerings from multiple providers, but comparison sites can be tricky to use and may sometimes charge a fee.

Using an FCA regulated broker service, like Reassured, can help you to save time and money on your policy.

They’ll take you through the whole application process, answer any questions you may have and compare quotes on your behalf to find you the best deal on a policy that meets all of your needs. The icing on the cake is that they don’t charge a fee for their service.

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