Protecting you and the ones you love
A life insurance policy can provide financial support for your loved ones if you or another joint policy holder passes away, helping to pay off debts like a mortgage and provide a means of living for your family. It usually comes in the form of a lump sum payment, but can also offer a substitute for a regular income.
You’ll be able to decide how much the policy will pay out, which you can base on factors such as outstanding debts and continued living expenses for your partner and children.
Life insurance policies usually pay out in the form of a lump sum, but they can also pay out in regular amounts over time – for example, if you wanted to provide a source of income for your family. You’ll pay your premiums every month, and when you pass away your beneficiaries will receive a pay-out.
It’s sometimes said that life insurance policies won’t pay out, but this just isn’t true – according to the association of British insurers, 98.3% of life insurance claims were paid out in 2019, the highest on record.**
**According to data provided in an ABI news release in May 2020, accurate as of May 2020
There are a number of different types of life insurance so it’s important to consider what’s right for you – the main ones are:
This pays out a fixed amount if you die during the term of the cover. Both the sum insured and your monthly payments remain the same, so your family know exactly how much they receive and premiums won’t rise due to inflation.
This decreases over time, with the amount of cover usually reducing in line with your mortgage repayments. It is the cheaper option, but you’ll need to consider whether the payout is sufficient to support your dependants.
This is designed for anyone aged over 50. The advantage of over-50s life cover is acceptance is guaranteed so you don’t have to answer any health questions or pass any medical test.
This pays out a tax-free lump sum if you are diagnosed with a serious illness during the term of your policy. It can provide financial support if you had to stop working.
This provides cover for the entirety of your life rather than a set term, so as long as you keep paying your premiums, your family will receive a payout however long you live.
This is offered as a benefit by some employers, and it pays out a sum to your nominated beneficiary if you die while you’re employed. It’s tax free, and usually worth a multiple of your salary.
If you and your partner both want to take out life insurance, you’ll also be able to choose between two individual policies or a joint policy.
This covers one person. Some couples take out two single policies so that their beneficiaries get two pay-outs, but these policies are usually more expensive as a result.
This covers two people, but will only pay out once. Depending on the exact wording of the policy, it will either pay out when the first person dies, or when both policyholders have died.
Age |
Average monthly cost* |
|---|---|
16-24 |
£6.60 |
25-34 |
£12.28 |
35-44 |
£18.38 |
45-54 |
£22.38 |
55-64 |
£24.34 |
*51% of customers who went on to purchase achieved a quote based on the figures above for level term, life-only (without critical illness cover) single person policies. MoneySuperMarket data July 2019 to June 2020.
Depending on the type of policy you take out and the provider you choose, you may be entitled to certain extra benefits alongside your life insurance cover. This can include:
When we go through significant changes in our lives, it’s natural to want to be prepared for the future – so you can ensure your loved ones are protected if the worst should happen. Therefore you might consider taking out life insurance at key times in your life, including:
As you may be looking at more serious joint financial commitments
As you’ll now have financial dependants who rely on your income
As you’ll have an outstanding debt that needs to be cleared for you or your family to keep the home
As your income may change significantly so you might want to think about putting some aside for your family
Funerals can be pricey affairs, so you may want to help your family with the cost
As writing a policy in trust will help your loved ones avoid paying tax on what you leave them
Life insurance can be pretty confusing – so if you’re struggling to tell the difference between ‘the sum insured’ and ‘decreasing-term insurance’, we’ve created a handy jargon buster. You’ll be an expert in no time
For a clearer idea of just how much cover you will need when you buy, try the MoneySuperMarket life insurance calculator. It takes into account your outgoings, including things like mortgages, debts and the cost of raising children
We compare 12 of the leading life insurance brands in the country, including:
"Life Insurance will give you and your loved ones piece of mind that your financial situation is protected. Many of our customers can get cover straight away on MoneySuperMarket, even if you suffer from common medical conditions. And where we are unable to offer a price for you to buy online, our trusted partner LifeSearch can provide personalised advice and help find the right policy for your needs."
- Neal Cross, senior commercial performance manager of life insurance
Finding the right life insurance policy is easier when you compare your options with MoneySuperMarket. You’ll be asked to provide a few details:
Insurers will need details about you and your family’s health and medical history, including pre-existing medical conditions.
Insurers will also ask about your lifestyle habits, including whether you smoke and drink.
The younger you are when you take out a policy, the cheaper it’s likely to be. Your occupation can also affect how much you pay.
If you want joint cover, you’ll need to have your partner’s health and lifestyle details to hand, as well as their occupation.
Your gift card is redeemable within 40 days of your sixth life insurance payment. Terms and conditions apply. Customers who have received a voucher/gift card before are not eligible for this promotional offer. You can find out more here.
**Restrictions apply, see www.amazon.co.uk/gc-legal
When you take out a life insurance policy, you should also consider the following if you haven’t already:
Depending on who you are and your medical history, coronavirus does have an effect on the price and availability of life insurance. Life insurance is very much still available, however, and you can find out more about how coronavirus affects life insurance at our FAQ.
The average monthly cost of life insurance is £15.85*, according to MoneySuperMarket data.
The cost of life insurance can depend on the type of cover you choose (single or joint life insurance) and the term of the policy (level or decreasing term).
Your monthly payments will also depend on the amount of cover you take out and your health and lifestyle.
*51% of customers who went on to purchase achieved a quote based on the figures above for level term, life-only (without critical illness cover) single person policies. MoneySuperMarket data July 2019 to June 2020.
The amount of life insurance you take out should ideally be enough to cover your mortgage repayments and the needs of your family if you were no longer around.
The average cover amount that consumers purchasing individual life insurance policies take out is £150,000, according to MoneySuperMarket data collected between July 2019 and June 2020. The average cover amount for joint life insurance was £200,000 during the same period.
It’s worth thinking about life insurance if you have a partner or child who relies on you financially, and they would struggle to pay the mortgage, rent or other bills if you were no longer around.
Life insurance isn’t a legal requirement, but most mortgage lenders will ask you to take out appropriate cover. You don’t need to take out life cover from your lender – you can buy it elsewhere.
Putting your life insurance policy in trust lets you name the people you want to receive your life insurance payout (your trustees).
There are different types of trusts available depending on your individual or family circumstances.
Putting your life insurance policy in trust also protects the payout from inheritance tax.
It can be a good idea to think about updating your life insurance policy if:
Your health or lifestyle has changed
Your financial situation has changed (your salary or mortgage might have increased)
Your family has grown
Your relationship with your dependant has changed – although you will need to check your insurer can do this for you
If you are not able to update your existing policy, you may be able to find a policy with a different provider that better suits your new situation. It’s always a good idea to get a personalised quote to see if your current insurance is the best option that’s available to you.
If you have a pre-existing medical condition you should still be able to get life insurance, but you may need to compare your options online.
If you have a more complex condition and you’re finding it difficult to get a price online, a broker or adviser – such as our partner LifeSearch - can help you find a provider that will cover you.
You’ll most likely need to share additional medical information and copies of any tests with the provider to help them understand the risk level of your condition. You’ll be asked to sign a medical release form and the insurer will then request this information from your doctor.
You can end up paying more because of this risk. But it’s important to declare any pre-existing medical conditions when taking out life insurance because if you don’t, your insurer can refuse to pay out for any claims.
If you are not able to work because of an illness or injury – which then means you’re unable to afford your monthly life insurance payments – a waiver of premium could mean you’ll be covered during this time.
This will need to be added to your policy as an additional level of cover and it will need to be taken out from the start of your life insurance policy.
If you’ve been diagnosed with a terminal illness and a doctor has given a prognosis of less than 12 months to live, you may be able to make a terminal illness claim on your own life insurance policy.
This means you would receive the payout now – instead of your dependant receiving the payout once you’ve passed away – and this can help to cover the cost of not being able to work during your final months and getting your affairs in order.
Some insurers offer terminal illness cover as part of their standard life insurance policy. Other insurers require you to add terminal illness cover as an extra level of cover. There will be terms and conditions with both options so you’ll need to read the policy documents to make sure you would be covered.
Insurers use a complex analysis of your age, lifestyle, medical history and living situation to calculate your premiums. You can find out more with our life insurance calculator.
Most life insurance policies run for a set period of time, for a period of at least five or ten years to – usually – 25 years. If you have special requirements, you can discuss them with your chosen insurer, but it’s worth bearing in mind that the younger you start your policy, the less you’ll have to pay.
Some employers offer what’s known as a death-in-service benefit to their employees, which will typically pay a lump sum of four times your salary to a named dependent. This type of policy is not a legal requirement, however, and it’s best seen as a complement to a life insurance policy, rather than a substitute.
You can always cancel your life insurance policy at any time you wish, but the vast majority of policies do not give you money back if you cancel before the end of the term.
You might want to cancel a policy because you’ve found cheaper cover elsewhere, or you might simply not want to keep paying your premiums.
You are legally allowed to take out more than one life insurance policy at a time. For instance, if you have a mortgage you may have to take out a separate policy to make sure your dependents can keep making payments.
Insurers probably won’t let you take out an infinite amount of cover, however.
Life insurance payouts are subject to inheritance tax just like the rest of your estate. If your total estate is worth less than £325,000 (or £650,000 if you are married and leaving it all to your spouse), then your dependents won’t have to pay a penny in tax.
However, if your estate plus your life insurance policy are worth more than that in total, inheritance tax will be due on anything above that threshold at 40%. This means that if you leave a total of £400,000, the first £325,000 is tax free. The rest – £75,000 – will be taxed at 40%, leaving £45,000.
Your family can avoid paying inheritance tax on your life insurance if you write your policy in trust.
No. If you are still alive at the end of your life insurance policy term, the money is gone.
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