Life insurance

What is life insurance?

Life insurance provides a tax-free cash payout if you die while covered. It can give you peace of mind that your loved ones can get financial support when you’re no longer there.

Most people use life insurance payouts to:

  • Pay off a mortgage
  • Cover funeral expenses
  • Cover living costs
  • Leave something behind for their family
  • Clear any debts they might have

Do I need life insurance?

It’s not a legal requirement to get life insurance. But it could give your family or dependents financial stability. A payout may help to ease any financial burdens.

A good time to think about buying a life insurance policy is when big life events happen:

  • Getting married: Reduce the burden on your loved ones. A life insurance payout could help cover the cost of your joint financial commitments.
  • Having a child: Knowing that your dependents can get financial support if you die can ease your worries.
  • Buying a house: For many people, buying a house is one of the biggest financial commitments they ever make. Life insurance could cover mortgage costs to help prevent your family from getting into debt.

What are the main types of life insurance?

Level term life insurance

Level term life insurance pays a set amount of money if you die while covered. You choose how long you want the policy to last and the amount of money you’d like your policy to pay out.

  • This type of policy gives you the certainty of knowing how much your family would get if you died while covered.
  • The total payout is the same no matter how long the policy has been active.
  • This level of cover may be suitable for you if, for example, you have an interest only mortgage.

How much does life insurance cost?

How much you pay for life insurance depends on your personal circumstances. Your age is likely to impact how much you pay. Prices for 20-year-olds start from £2.832 per month, whereas the starting price is around £12.632 per month for those who are 50. Here’s how much you might pay depending on when you buy your policy:

Age when the policy is boughtPrice per month²
20 years old£2.83
30 years old£3.95
40 years old£5.57
50 years old£12.63

Can I get cheaper life insurance?

Here are some things you can do to get the most out of your life insurance cover and to keep costs down:

  • Compare policies. Shop around to find cover that’s suitable for you. Look at what’s included and excluded in the policy. If you already have a policy, check that the cover still meets your needs.
  • Don’t take out more cover than you need. Work out how much cover you need to ensure you have enough to protect your family. Consider mortgage payments, debts, future expenses like your children’s education.
  • Reduce the length of your policy. Choose a shorter policy term if you only need cover for a specific amount of time. For example, if you have 20 years left on your mortgage, reduce the length of your policy to 20 years.

Other types of life insurance

Depending on your needs, you may want to consider buying additional types of cover:

Critical illness cover

Critical illness cover enhances life insurance with extra protection. It pays a tax-free lump sum for specified illnesses. You can use a payout to cover things like healthcare, treatment, or family support if needed.

Income protection

Income protection, also called loss of earnings insurance, protects your income if you can’t work due to sickness or injury. It offers regular payments to you and your family when you can’t work, helping cover living costs like mortgages, loans, and bills.