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Life insurance explained

Life insurance protects the finances of your loved ones should you pass away, or be diagnosed with a terminal illness. Life insurance premiums are normally paid monthly, and the amount you pay depends on your age, medical history and lifestyle. Scroll down to find the best policy for you.

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Featured life insurance providers

  • LifeSearch
    • LifeSearch are the largest independent and most awarded Life Insurance Advice broker in the UK
    • LifeSearch have protected over 1.5 million people since 1998
    • LifeSearch offer no obligation quotes for life insurance, critical illness insurance, income protection and other protection products
    • LifeSearch offers online compare and buy as well as fee-free advice over the phone that is tailored to your circumstances
    • LifeSearch helps you protect the life you love with prices from £5* per month for Life Insurance and £10* per month for Critical Illness Cover
    • LifeSearch will arrange your cover with one of the UKs leading insurers such as Legal and General, Aviva and Zurich to name a few
    • LifeSearch are there when it matters most and support you with an exclusive Care & Claims Service

    *Supporting information available here.

  • Watts Mortgage & Wealth Management Ltd
    • Protection you can trust. Watts Mortgage and Wealth Management has been ‘Moneyfacts UK Protection Adviser of the Year’ 2019 - 2022.
    • Experienced advisers. Our friendly, Cheshire-based team have been helping people like you find the right mortgage protection for over 25 years
    • No call centres. You’ll have your own personal adviser (with a direct phone number) supporting you every step of the way
    • Fee-free financial advice and no obligation quotes on all policies
    • Whole of market search. We can search far and wide to find the best cover for your situation because we’re not tied to specific insurance providers
    • Specialist medical knowledge. If you have pre-existing medical conditions our experts will help you find the best protection available

    All policies written into trust (where applicable)

  • Beagle Street

    Why choose Beagle Street life insurance to protect your loved ones:

    • 99.4% of claims paid out*
    • Quick & simple online application
    • Critical illness & child critical illness cover available
    • Fixed monthly payments

    On top of this, all Beagle Street policies also include:

    • One hour of free legal advice
    • Free will-writing service^
    • Samaritans-trained claims handlers
    • Counselling support service

    *In 2022 Beagle Street were backed by Scottish Friendly Assurance Society who, in 2022, paid out 99.4% of their life insurance claims. From 19th September 2023 Beagle Street insurance policies are underwritten by Family Assurance Friendly Society Limited.
    ^T&Cs apply. See site for details.

  • Post Office

    Protect your family even after you’ve gone with award winning Life Insurance from Post Office. It's quick and easy to set up and needn’t be expensive.

    • Leave behind up to £750,000 – depending on age
    • £100 Gift Card as a thank you*
    • Terminal Illness Cover included
    • Free access to a 24/7 Online GP and health specialist 365 days a year**
    • Simple online application - get a quote online in just a few minutes
    • Covered from day 1 (except if death results from self-inflicted injury in the first year)

    *T&Cs apply.

    **Service not part of policy contract.May be withdrawn at any time

  • AVIVA

    Help protect your loved ones with an Aviva Life Insurance Plan from as little as £5 a month.

    • We’re here to protect your loved ones with 99.4% of our life insurance claims paying out in 2021**
    • If you need critical illness cover too the total premium will qualify for cashback in line with the rates shown
    • You can get a quick and easy personalised quote in a matter of minutes
    • We already help protect 2.8 million families, could we help protect yours too?

    **Aviva UK Individual claims report 2022, based on claims paid in 2021

Note

Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. Moneyfactscompare.co.uk will receive a small payment either if you click the links or if you use their services after you click through to their site. All information is subject is subject to change without notice. Please check all terms before making any decisions.

Disclaimer

The list of life insurance providers on this page is a selection of services available and gives you an idea of the kind of options available. You can find out more about the individual products by visiting any of the providers listed. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfactscompare.co.uk will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfactscompare.co.uk recommends you obtain independent financial advice.

Life insurance explained

In a nutshell, you have to pay a premium (usually monthly) to the insurance provider for the duration of your policy, and on your death your beneficiaries will receive a payout (provided you die within the specified term, in the case of term assurance policies; see below). 

The amount of cover you’ll receive, and the premiums you’ll have to pay, will depend entirely on your individual circumstances and the kind of policy you choose. Your life insurance quote will take into account your medical history, age and lifestyle factors, and typically speaking, the younger and healthier you are, the cheaper your quote will be.

 

At a glance

  • Life insurance is there to provide a cash payout to your loved ones in the event of your death, helping them cover things like funeral costs, debt payments and household bills.
  • The amount you’ll have to pay for your premiums can depend on things like your lifestyle and medical history – typically, the younger and healthier you are, the cheaper your premiums will be.
  • You can get life insurance as an individual, but joint life insurance policies are also available.

What are the three main types of life insurance?

There are three main types of life insurance to consider, each with slightly different features: term assurance, whole of life, and family income benefit policies. Let’s take a look at each in turn. 

Term assurance policies

Term life insurance is the most basic type of cover. It lets you specify how much cover you want and how long you want to be covered for – if you die within that term, the policy will pay out, but if you don’t, the policy will come to and end and you won’t get your premiums back.
Within this broad kind of cover, there are three different types: level term (which pays out a lump sum when you die, with the amount you’re covered for remaining the same throughout the term), decreasing term (wherein the payout decreases over the term of the policy, making it particularly suitable for a capital and interest repayment mortgage), and increasing term (the amount of cover increases over the term, usually in line with inflation). In many cases, a combination of cover options may be the most suitable. 

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Whole of life policies

These policies are exactly as they sound – policies that provide cover for your whole life and that pay out on your death, no matter when that may be. Because of this guaranteed payout, whole of life policies are more expensive than term assurance policies, which only have to pay out if you die during a certain time period. 

Family income benefit policies

This is a type of decreasing term life insurance that pays out a regular monthly income to your beneficiaries, rather than a lump sum. The payments continue until the policy’s expiry date, provided you die within the term. 

Which providers offer life insurance?

There are a whole range of providers offering life insurance these days, from high street banks (such as HSBC Life Insurance) to well-known insurers (Aviva Life Insurance and Legal and General Life Insurance, to name but two) and even more niche providers. All will offer different levels of cover and prices accordingly, so as with anything, make sure to compare quotes to find the best life insurance policy for your needs.

Should I get a single or joint life insurance policy? 

In any of the above broad categories, there are also joint and single life policies to choose from, a decision that any couple will need to carefully consider. Single life policies cover one person only, with any payout going to the estate. Joint policies, however, cover both parties, and will either pay out on the death of the first partner (first-death policies, which are typically used to provide a lump sum to cover the mortgage) or the second (second-death policies, which can be used to cover an inheritance tax bill). First-death policies are usually more common, however, and can mean that the surviving partner is left without insurance (unless they take out a new policy, which could be more expensive as they’ll likely be a lot older than when they first arranged cover).

This is just one reason why many people opt for two single-life policies, rather than a joint one, as this can often provide far better value. Not only that, but single life policies offer more flexibility with any payout distributed to the estate under the terms of the will, rather than going directly to the surviving spouse. Then there’s the fact that if both partners die within the policy term, there’ll be two payouts to loved ones. Premiums need not be any more expensive than having a joint-life policy, either, so it could be worth considering. 

Why might life insurance not pay out? 

The most common reason for a life insurance policy not paying out is non-disclosure – i.e. you weren’t completely honest when taking out the policy. This is typically related to undisclosed pre-existing medical conditions (such as you had cancer but didn’t tell the provider) or lifestyle choices, such as substance misuse or smoking. 

If you missed a premium payment, your policy may also expire and therefore not pay out on death, and some policies have a “waiting period” – typically seen in over-50s life insurance – whereby if you die within the first 12-24 months, the policy won’t pay (though your premiums will be refunded). Likewise, if there are certain exclusions listed in your policy, then it won’t pay out, and if you’ve got a term assurance policy that expires, your death after this time won’t result in a payment.  

That said, life insurance providers aren’t looking for reasons not to pay – and in fact, over 99% of all claims are paid.

Do I really need life insurance? 

While it isn’t a legal requirement to have a life insurance policy – though it’s likely that a mortgage provider will recommend you have one before they’ll grant you the loan (see more below) – it’s often recommended to invest in a suitable policy, for the simple reason that you’ll have peace of mind that your loved ones’ finances will be protected after your death. 

However, if you’re a mortgage-holder, it’s even more important to have a policy in place. A mortgage will probably be the biggest financial commitment you ever make, with it not uncommon to owe hundreds of thousands of pounds to your lender. Could your family afford to cover that kind of sum if they didn’t have your income? If not, life insurance is essential, as if they couldn’t keep up with the repayments, there’s the chance they’d have to sell the property to repay the debt. Having life insurance for a mortgage prevents this from happening. You can find out more about this kind of policy in our guide 'Do you need life insurance to get a mortgage?'.

That said, if you don’t have a partner, children or any dependents – or if their income wouldn’t be impacted should you die – it may not be worth getting cover. It’s all about your individual circumstances. 

 

Life insurance FAQs

What does life insurance cover?

At its simplest, life insurance covers your life – and will give a cash payout to those who might financially suffer as a result of your death. It covers you if you die or are diagnosed with a terminal illness within the policy term, provided you fully disclose all conditions when you arrange your policy. 

What is not covered by life insurance?

Any conditions listed on the exclusion list, which will typically depend on your own medical history and pre-existing conditions. If you die as a result of one of these conditions, and didn't make the insurer aware of it when you took the policy out, the insurer doesn’t have to pay out. Other common exclusions include death related to alcohol or substance abuse, or as a result of a dangerous sport. 

How much life insurance do I need?

It’s a personal decision – and one that often depends on the type of policy you opt for – but as a general rule, it’s recommended to have a policy that will cover 10 times the income of the highest earner, at least until any children have left full-time education. If you’re simply opting for a decreasing term policy to repay a mortgage, the decision will be based on the mortgage value and the remaining term of that loan.

How much does life insurance cost per month on average?

This all depends on your individual circumstances. If you’re young and healthy, you’ll typically pay far less than someone who’s older with pre-existing conditions, but as with anything, it’s important to do your research and compare quotes to find the one that’s right for you. 

Do I need life insurance for a mortgage?

As discussed above, this is one of the few reasons where you really should consider investing in life insurance, if only to provide reassurance for your loved ones that they won’t lose their home after your death. 

Can you have more than one life insurance policy?

Yes, in theory. There’s nothing to stop you from having several different life insurance policies should you wish – and some couples find they have both a joint and single life policy – but it may be prudent to amend the terms of your current policy, rather than taking out new cover. The exception to this could be if you need more specialist cover (such as if you’re starting a business), but it’s always worth discussing the options with your provider and/or a broker to find the deal that’s right for you.  

What is the best age for life insurance?

Looking purely at cost, the best age to get a life insurance policy would arguably be when you’re younger, as premiums will typically be cheaper (though you’ll likely need to pay them for longer, particularly if you’ve got a whole of life policy). That said, if you don’t purchase a property or have financial dependents like children until later life, you probably won’t need to worry about a policy until that time, just bear in mind that premiums are usually more expensive the older you get. 

Which is better – term or whole of life policies?

It depends on why you need the insurance cover. Some would argue that a whole of life policy is better as it guarantees a payout, but premiums will be higher. A term life assurance policy could therefore be better suited to those with a specific need to cover a debt, or those on a budget, or with health conditions that could impact their life expectancy. 

Can I still get a policy if I’m older or have pre-existing conditions?

Typically speaking, yes, although it may cost more as a result. There are even specific products designed for over-50s life insurance that can be considered for those in this age group, many of which guarantee acceptance, though it’s still worth doing your research to find the best deal.

What happens to life insurance if you don’t die?

If you’ve got a term assurance policy and you don’t die within the set term, the cover will come to an end and you won’t get your premiums back. However, if you’ve got a whole of life policy, the cover will continue until your death. 

 

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Moneyfactscompare.co.uk will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by Moneyfactscompare.co.uk will always be from news@moneyfacts-news.co.uk. Be ScamSmart.

Moneyfactscompare.co.uk will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by Moneyfactscompare.co.uk will always be from news@moneyfacts-news.co.uk. Be ScamSmart.