How much would your life insurance payout be?
The amount of cover you choose when you take out life insurance is how much your loved ones will get if you die during the policy term. This is known as a life insurance payout.
The cover you decide to get is based on your own unique circumstances, what you’re looking to protect and how much you’d like to pay each month.
How much is a life insurance payout?
The payout your loved ones could receive if you pass away during your policy term depends on how much cover you took out, and the type of policy you have.
How much cover can I get?
You’ll be able to select the amount of cover you want when you take out your policy (up to the maximum amount available to you).
How much cover you choose to take out will likely depend on how much your loved ones would need if you passed away, as well as how much you’re able to pay in premiums.
Types of life insurance policies
The payout your loved ones could receive also depends on the type of life insurance policy you’ve taken out. This is because different types of policies vary in how they pay out if you die within the policy term.
We offer two types of life insurance at Beagle Street – level and decreasing life insurance.
Both policy types are term products, meaning they only last a set amount of time, but there are differences in how they pay out.
Level term life insurance
Level term life insurance will pay out an agreed sum if you die during the policy’s term. This is generally best for paying off fixed costs such as household bills or funeral costs, or if you want to leave your family a cash lump sum when you die.
Your payout and your premiums won’t change throughout the length of your policy (unless you make changes to your policy).
This means you’ll know how much your loved ones would get if you passed away within the policy term.
Decreasing term life insurance
Decreasing term life insurance is typically cheaper than level term life insurance. This is because the value of the policy decreases over time, but your premiums stay the same throughout the policy term (unless you make any changes to your policy).
It’s often used to pay off debts like a repayment mortgage. So as the amount you owe on your mortgage decreases, the payout to your loved ones if you die within the policy term does too.
How much tax is taken out of life insurance payouts?
In some circumstances, a life insurance payout can count as part of your estate when you die. This may make the life insurance payout subject to inheritance tax, which is currently charged at 40% on any part of the estate worth above £325,000 (the threshold).
Putting your life insurance in trust
A way to guard against inheritance tax on a life insurance payout is to put your life insurance in trust. This keeps it out of your estate, which means inheritance tax doesn’t need to be paid.
When you put your life insurance in trust you can name who you want to receive the payout (the beneficiaries). You can also name trustees who’ll issue the payout to the beneficiaries if you pass away.
Trusts are complicated legal entities, so it’s important to get the right financial and legal advice before putting your life insurance in trust.
How do life insurance payouts work?
If you pass away during your policy’s term, your loved ones could receive a payout if the claim is valid.
At Beagle Street, we’re here to support your loved ones with making a claim. We have bereavement trained claims handlers available to guide them through the claims process. In 2023, we paid out 99.8% of all protection claims.*
To streamline the process of making a claim, we have a trust form available to all our policy holders who have a single life insurance policy.
Putting your policy into trust means we can pay out your policy without having to go through probate. So your family could receive their payout much sooner.
*Beagle Street is underwritten by Family Assurance Friendly Society Limited, who in 2023 paid out 99.8% of all protection claims.
Find out how much life insurance could cost with Beagle Street
Our simple, online quick quote tool will let you know how much cover you can get and how much it’s likely to cost you. There’s no commitment to take out a policy.
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