Life insurance
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What is life insurance?
Losing a loved one can be extremely difficult. So it’s only natural you’ll want to make things easier for your loved ones when you pass away. Life insurance can help by easing the financial impact of your death.
It might pay out a lump-sum or regular payments to your dedicated beneficiaries if you pass away or are diagnosed with a terminal illness with a life expectancy of less than 12 months.
The cash sum, known as a death benefit, can offer financial security to your family and could be used to help cover outstanding mortgage repayments, debts, or living costs.
Do I need life insurance?
Life insurance is not a legal requirement, but it could give your dependants some financial stability when you die.
You might want to consider life insurance to:
- Ease the financial burden on dependants who rely on your income
- Pay off an outstanding mortgage, credit card, loan or other debt
- Cover the cost of your funeral expenses
Find out more about whether you might need life insurance
How does life insurance work?
Life insurance usually works like this:
- Choose your policy – You choose the type of policy you want, whether you want joint or single cover, how long the policy lasts, and the payout amount
- Make your payments – You pay the regular premiums to keep the policy active
- Make a claim – If you die within the policy term, your beneficiaries must file a claim to receive the payout
- Receive a payout – If the claim is successful, your loved ones will receive the payment and the policy will end
The amount paid out can change over time. If you take out a level term or whole of life policy, the payout is fixed. With a decreasing term policy, the payout decreases over the term of your cover.
Read more on our guide to how life insurance works.
What do I need to get a life insurance quote?
We want to help you find the right insurance at the right price. To do that we’ll need to ask you and any joint policyholders a few questions about:
1
The cover you need
Choose the type of cover, the amount you need, and how long you’d like to be covered for
2
A bit about you
Details about you like your name, date of birth and occupation
3
Your health
Things like any pre-existing medical conditions you have, your weight and height
4
Your lifestyle
Whether you smoke, drink, or take part in any dangerous activities
What Are the Main Types of Life Insurance?
There are two main types of life insurance – choose the one that meets the needs of you and your dependants.
Level term life insurance
Level term life insurance is the simplest type of life insurance. You decide the payout value and duration of the policy.
If you die within the term of the policy, your dependants will receive the payout as a fixed sum. The amount paid out stays the same regardless of when a claim is made.
Advantages
- You’ll know how much the payout will be as it does not decrease over time
- Premiums stay the same throughout the term of your policy, so they will not increase
Level term life insurance
- Usually more expensive than decreasing term
- Inflation could mean your policy’s worth less than you intended in real terms when you die
- No payout if you die outside of the policy term
Decreasing life insurance
Also known as mortgage life insurance, it’s designed to cover debts that decrease over time – like your mortgage.
The amount paid out by the policy reduces with time. If you were to die near the start of the policy term, your dependants would receive more than if you die near the end, when there’s less mortgage to pay off.
Level term life insurance
- Usually cheaper than level-term cover
- Can cover your mortgage so your partner or loved ones can keep their home if you die
Level term life insurance
- Payout value decreases over time
- It might only cover your mortgage and not extend to other bills and expenses for your family
How much cover will I need?
Deciding how much life insurance you need and how long to make the policy last for can be a difficult decision.
According to the Association of British Insurers, the average UK life insurance payout is £73,578,[3] but this might not necessarily be the right amount of cover for you.
Generally, the advice is to take a policy worth 10 times the highest earner’s annual salary. But the higher the amount you’re insured for, the higher your premiums.
Here’s a few things that are worth thinking about:
- How much would you like to leave to your dependents?
- How much of your mortgage is still outstanding?
- How much would be required to pay any major loans or debts like credit cards and funeral expenses?
- Do you have any existing life cover or investments that would pay out in the event of your death?
If you’re still not sure, we have a calculator that can help you work it out.
Compare Life Insurance Quotes from Over 10[4] Trusted Providers
Compare life insurance quotes
Buying a house or starting a family? If your circumstances change, you might want to consider getting life insurance
Page last reviewed: 04 June 2024
Page reviewed by Holly Thomas
[1]For comparing quotes online, Go.Compare introduces customers to Reassured which is a trading name of Reassured Ltd who are authorised and regulated by the Financial Conduct Authority no. 616144. Go.Compare’s relationship with Reassured Ltd is limited to that of a business partnership, no common ownership or control exist between us.
[2]Median costs of level term life insurance policies purchased through Go.Compare between 7 June 2023 and 2024. Based on single-policy, non-smoker. Sum insured up to £150,000 over 20 years.
[4]As of February 2024, there are 11 life insurers on the panel.