Life insurance is essential for many people because of its simple purpose - it pays out a cash sum to their dependents if they die.
Here are some quick-fire answers to the most common questions you may have about life insurance…
1 Do insurance companies pay out?
Yes. Insurers paid out 98% of term life insurance claims in 2017, according to the Association of British Insurers ('term' refers to life insurance policies which run for a set time).
As long as the terms of the policy are met, an insurance company will pay.
2 Would I have to pay income tax on a life insurance payout?
No. Your family won’t have to pay income tax on a payout, but it's worth bearing other possible tax implications in mind.
For example, a life insurance payment may increase the value of someone's 'estate' (that's their property, money and possessions) beyond £325,000.
This is the threshold (for 2019/20) when somebody would have to pay inheritance tax on their death.
3 Can I insure myself and my partner on one policy?
Yes. Many couples decide to take out a joint life insurance policy as it is often the most cost-effective option.
4 Is there anything that might prevent an insurer paying out?
Yes. There are some reasons a life insurance claim may be declined.
An example of this might be if a serious health issue was not mentioned at the time of taking out the policy (this is called non-disclosure).
5 Is the claim always paid as a lump sum?
No. Life insurance policies tend to pay out a cash lump sum, but it depends on your policy.
6 Do insurers offer support beyond a financial payout?
Yes. Many insurers offer access to support services, which can provide professional counselling, support for stress and financial guidance, plus many other things.
7 Can I cover my children on my life insurance?
Yes. It may be possible to add a child or children to your life insurance policy, but it will depend on the insurer and the policy.
8 Can I change my cover if my circumstances change?
Yes. You may buy a new home, have a child, or get married (or all three), and wish to increase your life insurance as a result. Speak to your insurance company.
9 Do I get any money back when the life insurance policy ends?
No. Once a term life insurance policy runs its course without a payout, no money is returned.
10 Is my life insurance policy protected?
Yes. Your life insurance policy is protected by the Financial Services Compensation Scheme (FSCS).
Find out more about Zurich life insurance.
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