Life insurance

Yes, the pay out from your life insurance policy could be taxed if it forms part of your estate.

Your estate is the total value of everything you pass on when you die (such as possessions, savings and property) and your life insurance contributes to this.

In the UK, if your estate goes over the threshold of £325,000, inheritance tax will be charged.

You could still avoid paying tax on it by writing your life insurance in trust.

Putting your life insurance policy in trust separates it from your estate, which means it doesn’t get hit with inheritance tax. Read more on inheritance tax and rules on GOV.co.uk.

Generally, your beneficiaries don't pay inheritance tax if:

• If you leave your estate to your spouse, civil partner or a charity

If your estate amounts to less than £325,000, even after your pay out

Yes, it can be possible to buy life insurance if you have a pre-existing medical condition.

Illness that could be classed as pre-existing conditions include:

• Diabetes
• Asthma
• High blood pressure

Whether you can take out a policy will depend on the severity of your condition.

Life insurance providers calculate your risk of dying during the policy term. Since a pre-existing condition could increase your risk of death, your costs are likely to be higher than those with no medical conditions.

You can take out as many life insurance policies as you need.

For example, you could buy a decreasing term life insurance policy to cover your mortgage (as your cover amount can reduce at the same rate as your mortgage balance), as well as a level term life insurance policy to cover family living costs.

You could also choose to layer on a critical illness cover policy to provide cover should you be diagnosed with a serious illness during the term of your policy.

How long your policy should last will depend on your personal circumstances and reasons for taking out cover.

For example:

• If you're taking out life insurance to protect your mortgage, your policy should at least last until the end of your mortgage term.
• If you're taking out life insurance to protect your family, your policy could end when your children are likely to become more independent (such as 18 or 21).

Yes, you can cancel your life insurance at any time.

Usually policies come with a 30 day cooling off period in which you can cancel and receive a refund of any premiums you paid during this time.

If you cancel after this time, you won't receive any refund of premiums.

Keep in mind that if you decide to buy life insurance again at a later date, you might have to pay more for the same level of cover you have now due to being older. Think carefully before cancelling as the cost of life insurance increases with age.

Even if you have a form of life insurance through your job, such as death in service/group life insurance, taking out a personal life insurance policy could still be beneficial.

With personal life insurance you have more control over the policy and can set it up to best meet your needs.

Cover through an employer normally pays out a multiple of your salary (for example, 3x your annual salary), so depending on what you earn this might not be enough to cover everything for your family.

It’s also important to be aware that if you leave your job, you will lose any employee benefits such as death in service.

If you're having trouble with monthly payments, get in touch with your life insurance provider as soon as possible. They might be able to adjust your policy or set up a payment plan.

Missing one payment isn't likely to lead to the cancellation of your policy, as long as you can catch up on payments. But, if you miss several, your policy might get cancelled. That means no pay out and wasted premiums.

Some insurance providers allow a grace period for payments. For example, you might have 30 days to pay after the due date. But, each provider differs, so it's wise to contact them early.

If your partner had a life insurance policy and you were named as a beneficiary (the nominated pers)

on to benefit from the pay out) you'll receive this pay out to help you financially.

You might qualify for extra benefits like the funeral expenses payment. It helps those with low incomes cover funeral costs. Another option is the bereavement support payment. It offers monthly support after your partner passes away.

Remember to apply within 3 months for full benefits. You have up to 21 months to make a claim.

For more information on financial support if your partner dies, visit GOV.uk.