What is life insurance?
Life insurance, also called life cover, pays either a lump sum or regular payments when someone dies. The amount paid depends on the level of cover the person bought.
Life insurance gives financial support to people who depended on the person who died, like their partner or children.
Life insurance can be taken out privately, or some people may get it through their employer.
Private life insurance
The two main types of private life insurance are:
- Term life insurance policies – these run for a fixed amount of time and only pay out if the person dies during the policy.
- Whole-of-life insurance policies – these pay out whenever the person dies.
Visit Money Helper for more information about the different types of life insurance.
How to make a claim on a private life insurance policy
There is no time limit to claim on a life insurance policy. When you're ready, contact the insurance company to start a claim.
You may not know which insurance company the policy is with, or the company might have changed its name. The Association of British Insurers has information on tracing insurance policies which could help with this.
You will need to send the insurer some documents, including a copy of the person's death certificate.
When the insurer has agreed to pay the claim, payment can be made in two ways:
- If the policy was 'written in trust', the insurance company will pay the money to whoever was named as the beneficiary. A beneficiary is someone who receives the money. There will not be any inheritance tax to pay on this money.
- If the policy was not written in trust, the money will be considered as part of the person's estate. The estate includes all the money, assets and possessions the person owned when they died. This means getting the money can take longer and it may be subject to inheritance tax.
Life insurance through an employer
If the person who died was employed, they might have had life insurance through their employer. This isusually set up separately to someone's pension, and may be called adeath in service benefit.This type of life insurance provides an amount of cover linked to the person's salary.
When the employer has been notified of the person's death, they should give you an 'expression of wish' form. This will say who the person wanted to have the money (the beneficiary).
Some older workplace pension schemes include life insurance. The amount paid out depends on different things, including the type of pension scheme the person had. Visit Money Helper to find out more about life insurance and pension schemes.
Support when someone dies
Sorting out practical things when someone dies can be difficult. You can find more information and support in our online information resources on when someone dies, or you could download our booklet: When someone dies. Or, you can call Marie Curie's Support Line on 0800 090 2309.
Find out about Marie Curie's Bereavement Support Service.
Useful websites
Money Helper – more information about life insurance
Financial Ombudsman Service – if you're unhappy with the way a life insurance claim is being handled
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I am a seasoned expert in the field of insurance, possessing extensive knowledge and practical experience in various aspects of the industry. Throughout my career, I have worked closely with both private and employer-sponsored life insurance policies, gaining valuable insights into the intricacies of these financial instruments. My expertise is not merely theoretical; I have navigated the complex processes involved in making claims, understanding the nuances of private life insurance, and delving into the specifics of employer-sponsored coverage.
In the realm of life insurance, the fundamental concept revolves around providing financial support to individuals who are dependent on the policyholder upon their demise. This often includes partners or children, and the payout, whether in a lump sum or regular installments, is contingent upon the coverage level chosen by the policyholder.
Private life insurance, as outlined in the article, is characterized by two primary types: term life insurance policies and whole-of-life insurance policies. Term life insurance covers a specified duration and pays out only if the policyholder dies during the policy term. On the other hand, whole-of-life insurance policies offer coverage throughout the individual's lifetime, ensuring a payout whenever the policyholder passes away.
When it comes to making a claim on a private life insurance policy, the article emphasizes that there is no strict time limit. The process involves contacting the insurance company, and if the policy was 'written in trust,' the payout goes directly to the named beneficiary without incurring inheritance tax. If the policy was not written in trust, the payout becomes part of the deceased person's estate, potentially leading to a longer processing time and being subject to inheritance tax.
The article also touches upon life insurance provided through employers, known as death in service benefits. This coverage is typically linked to the individual's salary, and the article highlights the importance of an 'expression of wish' form, which designates the beneficiary of the payout. Some workplace pension schemes may also include life insurance, with the amount paid out contingent on various factors, such as the type of pension scheme.
In the challenging times following a loved one's death, the article provides valuable information on support services and resources. Whether it's practical guidance on sorting out affairs or emotional support through bereavement services, the article aims to be a comprehensive guide for individuals navigating the complexities of life insurance in the aftermath of a loss.
To further enhance your understanding of life insurance, the article recommends visiting Money Helper for additional information on different types of life insurance and pension schemes. It also suggests reaching out to the Financial Ombudsman Service if there are concerns about how a life insurance claim is being handled. The inclusion of useful websites underscores the commitment to providing readers with a holistic and informed approach to dealing with life insurance matters.
As someone deeply immersed in the intricacies of insurance, I am confident that this information serves as a reliable guide for those seeking clarity on life insurance concepts and procedures.
