What your family might need
Take time to think about how much your partner and children might need, based on their living expenses as well as any outstanding debts
Life insurance lets you leave some financial security for your loved ones if you pass away. Your family would usually get a lump sum that can help to pay off any debts, like a mortgage, as well as giving them money to live off. If you prefer, you can arrange to provide a regular income for them instead.
According to the association of British insurers, 98% of life insurance claims were paid out in 2020, which equated to £17million paid every single day.3
Life insurance isn’t a legal requirement, but it can be a good idea if you have anyone that depends on you financially, like a partner or children. Life insurance can provide a financial safety net if you’re no longer around to provide for them anymore, as well as peace of mind.
If you’re looking to take out a mortgage, be aware that some mortgage providers might want you to have life insurance so they know the mortgage can be repaid if you do pass away.
3According to data provided in an ABI news release in May 2021, accurate as of May 2021
Take time to think about how much your partner and children might need, based on their living expenses as well as any outstanding debts
When thinking about how long you need cover for, consider how long your children might need financial support, or when your partner might retire
A joint policy with a partner can cover you both and be cheaper than two single policies but only pays out when the first person passes away
If you take out a higher amount of cover, your monthly payments are likely to be higher. Plus, the longer your cover lasts, the more you’ll pay overall
You could cut the cost of life insurance by making healthy lifestyle choices such as giving up smoking, drinking less or losing weight
Generally speaking, the older you are, the more expensive life insurance tends to be. This is because as you get older you have a greater chance of developing health issues
Level term policies are usually more expensive than decreasing term, for example, because the pay-out stays the same for the whole lifetime of your policy, as opposed to going down over time
|Age||Average monthly cost4|
4The average cost above is based on a level term, life-only (without critical illness cover) single person policy. MoneySuperMarket data June to August 2021, accurate as of September 2021
There are two main types of life insurance and you should choose the one that suits you and your loved ones best. In 2020, the average payout on term life insurance policies (individual and group) was £79,304.3
Choose between level and decreasing term life insurance:
Level term insurance is the simplest level of life insurance. You decide the pay-out value and duration of the policy.
If you die within the terms of the policy, your dependants will receive the pay out as a fixed sum. The amount paid out stays the same regardless of when a claim is made.
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It’s important to understand what your life insurance covers to give you the peace of mind that your family will have the financial support they need.
Cover varies between providers, but you can find some common inclusions and exclusions in our table below. It’s a good idea to compare policies according to the protection they offer, as well as the price – this will ensure you’re getting the policy you need.
|Covered||Sometimes covered||Not covered|
Death during your policy
|Terminal illness diagnosis where life expectancy is less than 12 months||Pre-agreed conditions|
||Drug and alcohol abuse|
||Suicide or death as a result of an injury if you’ve had the policy for at least 12 months from the start date||An assault or criminal offence
||Total disability during your lifetime|
||Critical illness during your lifetime|
Life insurance is there to provide financial security for anyone who depends on you, if the worst happens and you pass away. There might be some big moments in your life when your circumstances change – these are good times to think about cover.
Getting married: You might have bigger joint financial commitments as a married couple.
Starting a family: You’ll have someone who depends on you, and relies on your income.
Taking out a mortgage: You’ll have a debt that will need to be cleared so you or your family can keep your home.
Starting or ending employment: Your income could change significantly, so you may want to think about putting some aside for your family.
Planning your funeral: Funerals can be expensive, so you might want to help your family with the cost by leaving them money to put towards a celebration of your life.
Covering inheritance tax for your dependants: Writing your life insurance policy in trust means your loved ones won’t have to pay any tax on inheritance you leave them.
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"Life insurance will give you and your loved ones peace of mind and financial protection. Everyone’s situations are different and the policy you go for, and level of cover you choose, will be unique to you. It’s important to get the right amount of cover - too little and your family won’t be looked after but too much means you’re paying more money than you need to be. Our free cover calculator is a great tool to help you work out just how much life insurance you need."
- Neal Cross, senior commercial performance manager for life insurance
We’ll need some details about you and your family’s health and medical history, including any pre-existing medical conditions.
You’ll also need to tell us about your lifestyle, such as your drinking habits, and whether you smoke.
The younger you are when you take out life insurance, the cheaper it tends to be. The type of work you do can also affect the price.
If you’d like joint cover, you’ll need to have information to hand about your partner’s health, lifestyle and work.
The chances are you’ll be eligible in most cases, even if you have a medical condition, as long as you live in the UK and you’re at least 18 years old.
The most important thing is to make sure you answer the questions honestly when you’re getting a quote, so your insurer has the full picture. This way, you know your cover will be valid.
We run our life insurance service with our partner, LifeSearch. If you’d like some guidance about what kind of cover you need, you can talk to them free of charge. Give them a call on 0800 197 3178.
Their opening hours are:
The younger and healthier you are, the cheaper your life insurance will be, so apply earlier in life for a lower premium price
Provides cheap life insurance for a period when you need it most, like the term of your mortgage or until your children move out
This will ensure your beneficiaries won’t have to pay any inheritance tax and will make the payment process quicker
Combining policies with life insurance, like critical illness cover, can be cheaper than buying them separately
Changes to health or lifestyle, divorce, new job or redundancy, or mortgage changes could all affect your terms and prices
Don’t hide vital health information from your insurer, you might get cheaper premiums but risk losing the pay-out
Healthier habits can make you lower risk for insurers meaning lower premiums (e.g. non-smokers pay less for life insurance)
Compare a range of deals but don’t simply pick the cheapest cover you can find, make sure you get the right cover for your needs
This policy type will pay out a tax-free lump sum if you’re diagnosed with a serious illness. It can give you and your family financial support if, for instance, you have to stop working.
This is specifically designed for anyone over the age of 50. You’re guaranteed to be accepted, and you don’t have to answer any health questions or pass a medical test.
This type of life insurance covers you for your entire life, rather than for a fixed term, as long as you keep up your monthly payments. This means your family will get a pay-out when you pass away, whenever that may be.
Some employers offer death in service cover as a benefit. If you pass away while you’re employed, a person you’ve chosen will get a tax-free lump sum, which is usually a multiple of your salary.
Losing someone important to you is never easy, and if you’re a business owner you will also have to consider the impact losing a key person can have on your operations.
Taking out a key person insurance policy can protect your business in the short term by providing a cash boost. So if someone key to the operation of your company passes away or becomes unable to work as a result of their health, it can help you survive in the short term and give you more time to make long-term plans.
Depending on who you are and your medical history, coronavirus does have an effect on the price and availability of life insurance. Life cover is very much still available, however you can find out more about how coronavirus affects life insurance at our FAQ Answer copy.
You can take out critical illness cover as well as life insurance, and this will pay out if you’re diagnosed with a named medical condition during the term of your policy. It generally comes as either:
MoneySuperMarket offers the option to take out additional cover once you have completed a life insurance quote, with the premium calculated using the information you gave when applying for life cover. We believe this provides a more flexible and comprehensive solution than a combined policy.
Term life insurance is a policy that offers cover for a set period of time – when the term ends the policy lapses, and if you survive the term then it won’t offer a pay out.
Whole-of-life insurance offers a pay out no matter when you pass away – it will cover you for the rest of your life.
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:
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. Answer copy
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.
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 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.
When you take out life cover, you’ll get:
However your life insurance policy won’t include:
Some insurance providers offer extra benefits alongside your life policy. These can include:
Remote GP services
Claim support and counselling services
How much do you know about life insurance? Take our quiz to find out.
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