Understanding Life Insurance

The main purpose of life insurance is to provide one's dependants or some other beneficiaries with a guaranteed source of income. The life insurance policies pay one's family either a lump sum payment or separate smaller sums if one dies or comes down with a serious disease.

To know that you have arranged a full life-assurance policy comes as a relief both for you and your loved ones. People usually take out Life Insurance for two reasons:

  • Firstly, in order to protect their mortgage, people need an amount of money sufficient to insure their balance if they die or are diagnosed with an incurable disease.
  • Second, to safeguard their family, they need a good sum of money to be paid to their loved ones in the event of death or incurable disease.

Types of Insurance:

  • Decreasing Term Assurance (also known as Mortgage Protection)

    This type of insurance is often used to protect capital and interest repayment mortgages where an outstanding balance decreases each year. It can be taken out on one's own or in partnership. The cash lump sum payment is intended to pay off the unsettled balance of one's mortgage.

  • Level Term Assurance (Family Protection)

    It is designed to pay out a particular amount of money if the policyholder dies during the term of the policy. When deciding on such a type of insurance, one needs to choose how much insurance they need as well as how long the policy will insure them. The sum insured remains the same throughout the whole period of the policy.

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