Understanding Life Insurance Policies: Decision Guide

family life guaranteed life insurance difference

You understand how important protecting your loved ones really is. Now you want to know more about what kind of policy will suit your lifestyle and your budget. But most of all, you want to make an informed decision when it comes to putting the right cover in place.


Here at Smart, we’re true believers in hoping for the best but preparing for the worst. Our life insurance policies can help you do just that, but which policy is right for you?


In order to get the process started, there are a couple of key questions to ask yourself. This article will provide you with the answers to these questions.


Smart Family Life Insurance Explained


If you’re reading this, you may already be aware of the financial implications that your family may face if the worst should happen.


With Smart Family Life Insurance, you can rest easy knowing that the ones you love are protected. But how does it work?


When you choose Smart Family Life Insurance, you can select a benefit amount from £60,000 up to £750,000. The benefit amount you can choose depends on your age and will be paid if you die or are diagnosed with a terminal illness.


  • From age 18 to 44 - £60,000 to £750,000
  • From age 45 to 54 - £60,000 to £400,000
  • From age 55 to 59 - £60,000 to £250,000
  • From age 60 to 64 - £60,000 to £150,000


Why should you consider Smart Family Life insurance?


You must be a UK resident aged between 18 and 64 to apply for this cover. It is best suited for those who wish to protect their families from outstanding costs like mortgage payments, rent or household bills.


What are the policy types?


We offer two policy types under our Smart Family Life Insurance. Age Based premium or Level premium. But what’s the difference?


Age Based Premium


Our Age Based policy includes a 5% automatic annual increase to your chosen benefit amount for your life insurance and any optional cover you have. It is automatically applied each year for 10 consecutive years from your policy start date.


The monthly premium is recalculated every year on your policy anniversary. It gradually increases with your age and any applicable benefit amount increases.


Here’s an example of how this works; a benefit amount of £100,000 will increase by 5% to £105,000 after the first policy anniversary and will reach £150,000 after 10 years.


If this sounds a bit confusing, don’t worry. We’ll send you a new schedule each year which will show your new monthly premium recalculated based on age and the new benefit amount. You can choose at this time if you wish to continue with or opt out of the benefit amount increase. If you choose to opt out, your monthly premiums will continue to increase in line with your age only.


With the Age Based policy, your monthly premium starts at a lower rate than the Level policy type. That’s why this policy type often appeals to those on a tight budget during the early years of their policy.


Another benefit of this policy is that it’s a whole life policy, meaning you can keep it for the rest of your life as opposed to deciding on a fixed term.


Level Premium


Our level policy type is ideal for those who want a policy with fixed premiums that are not affected by age.


With this policy type you have a choice of a fixed term anywhere between 10 to 40 years. You will be covered up until the end of your chosen term or on the policy anniversary following your 79th birthday, whichever is sooner.


If I die, what is covered?


The Smart Family Life Insurance benefit amount will be paid if you die or are diagnosed with a terminal illness where death is expected within 12 months. You must be diagnosed by a medical specialist.


How much will it cost?


Unfortunately, there is no one-size-fits-all answer here. The amount of premium payable will depend on your chosen policy type, benefit amount and if you’ve chosen any optional cover like critical illness or child cover.


Unlike Smart Guaranteed Life Insurance, your personal circumstances (age, health, lifestyle, family history, occupation) can also affect premiums payable.


How does the payment of premiums work?


The amount you must pay each month i.e. your premium, will be stated in your schedule which will be sent to you if you are accepted for cover.


Premiums are payable monthly by direct debit.


If you choose an Age Based policy type, you will be sent a new schedule at each policy anniversary detailing any premium and benefit amount increases.


If you choose a Level policy type, your premiums are fixed from the date when your policy starts and will not change throughout the duration of your policy. Premiums are payable until the end of your policy term.

 

Is there any extra cover available under this policy?


Yes, this policy allows you to add on optional Children’s Cover, Critical Illness Cover and Accidental Death Cover.


Children’s Cover helps cover any costs that might be incurred from things like medical expenses and school tuition fees should your child suffer a serious injury or illness resulting in permanent irreversible symptoms. It covers bacterial meningitis, paralysis, encephalitis and some other injuries and you are able to cover financially dependent children under the age of 21.


Critical Illness Cover pays a benefit amount to you should you suffer a defined serious illness. Cancer (excluding less advanced cases), coronary artery bypass grafts (with surgery to divide the breastbone), heart attack (of specified severity), or stroke (resulting in permanent symptoms). You can apply to add Critical Illness cover to your policy if you are aged 18 to 59.


Accidental Death Cover pays a benefit amount in addition to your Family Life Cover benefit if you die by way of accidental death.


How long does this cover last?


Smart Family Life Insurance cover will continue for your entire life until any of the following occurs:


  • You die or the benefit is paid for a terminal illness
  • You cancel the policy.
  • We cancel the policy.
  • In the case of a Level premium policy only, the date the policy term expires.
  •  For a Level premium policy only, the policy anniversary on or following, the attainment of age 79.


Ok, so you know how our Smart Family Life Insurance works. It’s time to check out Smart Guaranteed Life Insurance.


Smart Guaranteed Life Insurance Explained


Smart Guaranteed Life Insurance allows you to enjoy life with the knowledge that your family will receive a lump sum should you die.


When you choose Smart Guaranteed Life Insurance, you will select a benefit amount between £2,000 and £20,000 depending on your age. Unlike our Family Life Policy, we won’t ask any questions regarding your health or medical history.


Why should you consider Smart Guaranteed Life Insurance?


You’re eligible for this policy if you’re a UK resident aged 30-80. This policy is suitable if you wish to contribute towards funeral costs, take care of outstanding debts or simply to leave your loved ones a gift.

You can take out cover for yourself under a single plan or with a partner under a joint plan.


If I die, what is covered?


If you die, we will pay out a lump sum to your legal beneficiaries. Here’s what they will receive:

Accidental Death – Your family will receive three times the benefit amount.


Non-accidental death (within first 24 months) – If you die from a non-accidental death within the first 24 months from your policy start date, your family will receive the total sum of all premiums paid towards your policy.


Non-accidental death (after first 24 months) – if you die from a non-accidental death after the first 24 months from your policy start date, your family will receive the full benefit amount.


How much will it cost?


The amount of premium payable will depend on your chosen benefit amount, your age, and whether or not you have a single or a joint plan. Cover starts from £3.57 per month*.


*For a 30-year-old, on an individual policy with £2,000 of cover.


How does the payment of premiums work?


The amount you must pay each month will be stated in your schedule which will be sent to you if you are accepted for cover.


Premiums are payable monthly and are fixed from the date when your policy starts. Your premiums will not change throughout the duration of your policy. However, on the policy anniversary following your 95th birthday, premiums are no longer payable, but you will still be covered.


How long does this cover last?


Smart Guaranteed Life Insurance cover will continue for your entire life until any of the following occurs:


  • You die
  • two consecutive monthly premium payments are outstanding;
  • You cancel the policy
  • We cancel the policy


Now that you are familiar with our policies and what they can do for you, we’re going to address some common concerns regarding financial risk.


What else should I be aware of before taking out a life insurance policy?


As with most insurance types, there can be financial implications under certain circumstances. It’s time to identify any potential risks so that you get a fuller understanding of our policies.


There is no cash-in value


Smart Family Life Insurance and Smart Guaranteed Life Insurance does not have a cash-in value at any time. If you fail to pay your premiums for two consecutive months, your policy will end with no value and cover will no longer be provided under your policy. The same rule applies if you should decide to cancel your policy.


Inflation


Your benefit amount is fixed when your policy starts, and it does not change. You should be aware that the value of your chosen benefit amount may not keep up with inflation. This means that the value may reduce over time and the final benefit amount at the time of your death may not be worth as much.


Inheritance Tax (IHT)


After you die and your legal beneficiaries  receive payment, the benefit may be subject to Inheritance Tax. This only applies if the combined value of your estate exceeds the threshold of £325,000.


You can avoid IHT by writing your policy into a Trust. Although this is a complex legal process that will likely require professional advice. You can read more about the financial ins and outs of life insurance here.


Paying in more than you get back


Depending on how long you live, it’s possible that you may pay in more than the final benefit amount. This only applies to Smart Family Life Insurance and Smart Guaranteed Life Insurance does not 


Benefit may not be paid


If you fail to disclose relevant and accurate information in response to any questions asked during the application process, your claim may not be paid, and your policy could be cancelled. Part of the benefit amount may be paid depending on circumstances.


As you can see once you keep up with your payments and choose a sufficient benefit amount, you shouldn’t run into any problems.


Now that we have all the key information done and dusted, you’re probably wondering what happens when you die and your family wants to make a claim?


Ready to get started?

Making the decision to get life insurance could be the most important thing you do for your family. Getting familiar with these questions and considerations are key to getting the best possible policy for your needs.


Our priority is to make the whole process as straightforward as possible for our customers. If you want to know more about our policies or you would like to help secure financial protection for you and your family, simply fill in one of our online forms to request a quote or a callback. We’re available to chat by phone weekdays from 9am-8pm and Saturdays from 9am – 5pm.