What is life insurance and how does it work?

Life is precious, and while nothing can replace you, it’s important to prepare and protect your loved ones. Life insurance helps to protect your loved ones in the event of your death, reducing the financial burden on your family by providing them with a cash sum. 

Read on and discover how life insurance works in the UK and the different types of policies available.

Life insurance can help protect your family financially by paying out a cash sum in the event of your death – as long as the policy is active, and a valid claim is made. Depending on your policy, the cover amount is either paid regularly or in one lump sum.

You can’t put a value on life, but with life insurance, your family can get some support if you’re not around to help them. This means things like a mortgage, debts, living expenses, bills, funeral expenses and more could be paid towards for if you die, reducing the financial strain your loved ones. Critical illness cover can also provide financial support if you’re diagnosed with a critical illness. 

What is a life insurance policy? 

Some policies cover you for life, others for a set period of time, and some offer a set payout while others change over the duration of the policy. Life insurance policies offer flexible levels of cover that can be adapted to suit your individual needs depending on factors such as cover required, your age and your health/lifestyle.

Can I choose where my life insurance money goes?

Yes, an important part of your policy is defining what are known as beneficiaries – the persons, charity, trust or estate that will receive the cash sum in the event of your death. 

By having the right arrangements in place, you can ensure your money goes where it’s needed most. It’s worth considering that, if you have a joint policy, then the money will usually go to the surviving policy holder. 

Try to consider where you want the cash sum to go in the event of your death. Seek financial or legal advice to understand the positives and negatives of different options.

There are a range of life insurance policies to suit your needs, but sometimes all those products can feel overwhelming. 

Here’s what you need to know about Sainsbury’s Bank Life Insurance and our levels of cover – life insurance, decreasing life insurance, and joint policies.

Life insurance  

Also known as level term life insurance because what you pay and your cover remain the same unless changes are made to the policy.

This means that if a policy holder dies during the term of the policy the cash sum will always be the same. However, it’s worth noting that the payout is fixed, meaning it won’t rise with inflation. 

Sainsbury’s Bank Life Insurance is an example of level term insurance.

Decreasing life insurance 

Homes are full of love and memories, but they can also come with heavy financial cost. When you’re no longer able to support your family, they may still need to continue making mortgage payments. 

With a valid claim, decreasing life insurance can help pay off a repayment mortgage. The total payout usually reduces over time, roughly in line with how a repayment mortgage reduces, as you will likely be paying off your mortgage over the policy term.

Joint life insurance  

As your relationship develops, it’s common to start sharing financial responsibilities. A joint life insurance policy covers you both under a single plan – regardless of whether you’re married. If one of you were to pass away during your policy term, the remaining partner may receive a tax-free cash sum. It’s worth noting that Over 50s insurance can’t be taken out as a Joint Life Insurance policy.

This cash sum could help with:

• Paying off the mortgage
• Household bills
• Raising your children
• Living expenses

Over 50s life insurance  

Over 50s life insurance is a standalone policy that gives you cover for the rest of your life, helping you to enjoy the years to come safe in the knowledge that your loved ones will receive a cash sum when you pass on, either as a gift or to use toward funeral costs.

With Over 50s life insurance, you’ll be able to rest assured that when the worst happens, your partner or family are helped financially. If death occurs in the first year, payments may just be a return of premiums, unless in the event of accidental death.

Choose from either a fixed or increasing monthly premium and cover, to suit your situation and what you wish to leave behind. 
 

You can’t predict the future. But life insurance may protect your family against the things you can’t plan for. Life insurance is a personal thing, and your needs may differ from the next person. 

There are a lot of products and policies, all with different costs and benefits. Additionally, the amount you will pay for life insurance can depend on things like:

• Age
• Lifestyle
• Health and family medical history
• Occupation
• Length and type of cover
• Smoker status

Additionally, optional extras such as critical illness cover can also increase your total premiums. 

Get a personalised look at what a life insurance policy could cost you with the Sainsbury’s Bank Life Insurance Calculator.

Get Nectar rewards with Sainsbury’s Bank Life Insurance 

Life is for living, so when you take out a Sainsbury’s Bank Life Insurance policy as a Nectar member, you get Nectar points based on the premium. You can also unlock discounts on your premium*, so you’ll have more money to play with. 

*Discounts apply to your premiums with or without critical illness cover.

Legal & General Assurance Society Limited Registered in England and Wales No. 00166055. Registered office: One Coleman Street, London, EC2R 5AA. Legal & General Assurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.