Life insurance

Different types of life insurance for your family

If you have people who depend on you financially, you’ve probably considered life insurance before. If you’re holding off taking it out because you’re not sure which policy to choose, this comparison should help.

Here are the different types of life insurance we offer, what the lump sum might be used for, and the milestones that tend to motivate people to get cover.

Why take out a life insurance policy?

The idea behind any type of life insurance is to have the reassurance that you have financial protection in place for you and your loved ones if the worst happens. 

It’s the knowledge that if a valid claim is made on your policy during the term of your cover, a tax-free lump sum would be paid out to provide the financial help, and breathing space, needed during a difficult time.

What different types of life insurance are there?

Here are the four different life insurance products we offer.

Life insurance

This lets you leave a lump sum for your loved ones if you pass away during the policy term. We also pay out on terminal illness, where life expectancy is no more than 12 months. 

Perhaps you want to make sure your family could maintain their lifestyle and comfortably cover outgoings like rent, childcare costs and other bills, or any unexpected costs. Or maybe you’re solely focused on the lump sum being enough to help pay off a mortgage, to make sure your partner could stay in the family home when you’re gone. 

When you buy term life insurance you choose between two types of cover.

Decreasing cover is designed to pay off a repayment mortgage, or a long-term loan. The amount you have left to pay on a repayment mortgage gradually decreases over time, and so does the cover amount. That’s why it’s often also called mortgage protection insurance.

Or you might want to consider level cover, also called family protection, if you have an interest-only mortgage, or want to help your loved ones use the lump sum for everyday costs, too. The cover amount is a set lump sum that doesn’t decrease over time. 

You also choose how many years you want to have the policy for. It can last from one year to 50 years, and until you're 90. You can also have a joint or single policy. So there's some flexibility.

Free parent life cover

This is a year of life insurance for parents of under fours, completely free of charge. Each parent can take out a plan for each child under four, and we don’t ask for any bank details. 

So your partner or other nominated beneficiary would get a lump sum of £15,000 if you pass away within that 12 months, to use however they and your children need. This can be as well as a life insurance policy, to boost your cover amount, or on its own. Though bear in mind you can’t have cover for the same child for more than a year, and each parent can't have more than one policy per child.

If you're eligible, you can fill in the short application form to start your free cover, once you’re registered with MyAviva.

Over 50s life insurance

This is lifetime cover that you can take out if you’re aged between 50 and 80, where a payout is guaranteed when you pass away. So you don’t need to think about how long the cover will last.

With this cover, you know you’ll leave a lump sum behind for your partner, family or other beneficiary on a valid claim, when you’re gone. Your premiums won’t rise and once you’ve had your policy for 30 years, or from the plan anniversary after your 90th birthday, you’ll no longer pay anything, but your cover will continue.

Why might you choose this instead of life insurance? You might be looking for a lower cover amount — perhaps because your kids flew the nest a while back and are financially independent, you’ve paid off your mortgage, or you aren’t looking for a joint policy. The payout might be intended to help cover the cost of your final goodbye, or you might simply want to leave a lump sum for your family to use as they wish. 

You don’t need to have a medical when you apply for this type of cover. Your premium is based on your age and how much cover you’d like.

Critical illness cover

This one’s a bit different. As the policyholder, you get the lump sum payout if you’re diagnosed with a critical illness of a specific severity defined by the policy, within the policy term and survive for at least 10 days. It doesn't pay out on death.

It’s about helping you cope financially if you have a serious, maybe life-changing illness in the future, so you can focus on your health and worry less about affording everyday costs, or how you’ll pay your rent or mortgage if you can’t work. Our policy also includes a children’s benefit as standard.

You can choose level or decreasing cover when you apply, depending on what you want the lump sum to go towards, and you can have joint cover with your partner, if you like. It’s up to you how long you want the cover to last — from five to 50 years, and it can last until you’re 75.

Bear in mind these plans have no cash value, and once the full cover amount's paid out, the policy ends. If your payments stop, so does your cover.

When should you take out a life cover policy?

There are a few common triggers for taking out life cover. But as families come in all shapes and sizes, you should pick what’s right for yours, and what’s affordable for you. It’s worth remembering that when you apply for cover, your premiums are likely to be higher the older you are.

When your family grows

The realisation that there’s a small being who’s utterly reliant on you can be a strong motivator for some parents, and parents-to-be. With life insurance, you’d know the lump sum could help make sure your children have what they need financially for living expenses or more if you were no longer around. 

The impact of being seriously ill can also hit the family finances, if there’s no income, or reduced income coming in for a time while you get treatment. And as our critical illness cover includes a children’s benefit at no extra cost, you’d get a financial helping hand to help you manage, if the worst did happen.

When you get a mortgage 

Some mortgage lenders ask you to have life insurance in place to protect the asset you have the loan on — your home — when you take out a mortgage. So if they prompt you to look into it during the home-buying process, it might be the first time you think of it. Or you may already be on the property ladder and your next move brings changed family circumstances, where you want to put financial safeguards in place.

You can choose decreasing cover or level cover to help your loved ones pay off a mortgage if you pass away within the policy term. The lump sum from either type could help pay it off, but it depends on the type of mortgage you have, and if there are any other costs you’d like to help cover. 

If you're taking out life insurance at the same time as buying a home, we'll give you up to 90 days of free home purchase life cover. Once we’ve accepted your life insurance application, the free cover starts when you’ve exchanged contracts and lasts until completion — provided you’ve given us a future start date that matches that. We explain it more in the policy summary.

Whether or not it’s mandatory for your mortgage agreement, it’s going to bring some valuable peace of mind that the lump sum would help your partner and children afford to stay in their home after you’re gone.

If you've been together for a while

It could be marriage, a civil partnership, moving in together — or a big relationship anniversary where you want to take steps so your partner has the financial security of a lump sum if something happens to you.

You can take out a joint life insurance policy with your other half, or you can take out single policies. A joint policy usually costs less than two separate policies, though the policy pays out when the first partner passes away and ends after that. The money will usually go to the surviving joint policyholder or, if you have a single life insurance policy, it’s paid into your estate, unless the policy is in a Trust.

You can get joint critical illness cover, too. Again, once the full cover amount is paid out for one person, the policy ends. And if joint policyholders decide to go their separate ways in the future, we can split the policy into single policies, and we won’t ask any medical questions.

So, as you can see, there isn’t really a ‘best’ type of life insurance. The best type of cover is what’s right for you and your family now, and in the years ahead.

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