Why UK consumers prioritise savings over Life Insurance

According to recent surveys, many UK consumers are more likely to prioritise savings over life or health insurance to protect their finances.

COVID-19 has highlighted a longstanding lack of consumer trust and engagement that many consumers have with important insurance products. This needn't be the case though, as according to figures released by the ABI (Association of British Insurers) 98.3% of protection claims were paid out in 2019. Despite this, many consumers still believe they’d be better protected with savings, regardless of the fact that in many cases, it wouldn’t be anywhere near what would be required to cover the costs of critical illness or death.

The cost of purchasing a policy is also a factor for many, however this is more perception than reality as the cost of cover for many people often works out at just a few pence a day. When you consider this, many would have to agree that life insurance could actually be considered very good value for money.

If your children, partner or other family members depend on your income to cover their living expenses and the home they live in, you should definitely consider life insurance to help provide for your loved ones in the event of your death. You can’t rely on the state to take care of your family as the money they would get from the government is probably much lower than you’d expect.

Nobody knows what the future holds, but everyone knows what and who’s important to them.

A lack of understanding (and effective communication) of the benefits of life insurance could also be to blame for this, as it can be daunting for many who don’t really know what they’re looking for.

Everyone understands a pot of cash, whereas not everyone understands what a ‘decreasing-term policy’ is.

The 2 main types of life insurance are 'term' life insurance and 'whole-of-life' insurance.

‘Term’ Life Insurance policies run for a fixed period of time (known as the ‘term’ of your policy) eg. 10, 15 or 25 years - but only pay out if you were to die during the term of the policy. There’s no lump sum payable if you live beyond the term.

These policies can be taken out as Single or Joint policies, which are similar, but with a few key differences:

Single or Personal Life Insurance covers one person and if the policyholder were to die during the term of the policy, their loved ones would receive a payout. If you and your partner were to decide to take out two separate ‘single’ policies, then a payout could then be claimed for each policy if both policyholders die within the term.

Joint Life Insurance covers two people on a single policy and means there’s only one monthly premium to pay. Some people find this simpler to manage and you’ll only need to complete one application, but you would have to answer questions for both policyholders.

‘Whole-of-life’ insurance policies (also known as Life Assurance) pay out regardless of when you die, as long as you keep up with your premium payments.