Do I need life insurance?
Key takeaways
Life insurance provides financial support for loved ones after your death
Consider your financial situation and number of dependents when choosing cover
The life insurance cover you need is a personal decision influenced by factors such as income, mortgage size, and family expenses
Do I need life insurance?
There is no legal requirement to take out life insurance, but most people can benefit from putting some sort of financial protection in place in case they die unexpectedly. Life insurance can secure the financial future of your family when you’re no longer there to provide for them.
One of the main ways to determine whether you need life insurance is to look at both your financial obligations and who would be impacted if you were no longer here.
Would your family be able to manage the mortgage payments, household bills, or childcare costs?
Could they cover funeral expenses?
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When should I take out life insurance?
Premiums tend to be higher for older policyholders, so it may be wise to lock in a policy earlier in life.
Otherwise, the best time to look at life insurance is during pivotal life stages and when you take on greater financial responsibilities. For example:
A mortgage is a significant financial burden. Ensuring that their partner isn’t left to shoulder this alone is a key motivation for many people taking out life insurance.
A mortgage life insurance policy, or equivalent policy that would go towards covering mortgage costs can help surviving occupants of the house pay off the mortgage, ensuring that your family can stay in their home if you die.
If you have children, you should think about what their financial situation would be if you were to pass away. This is particularly important when children are young and depend on you financially.
An estimated 46,300 dependent children (aged 0-17) are bereaved of a parent each year. That’s 127 children newly bereaved each day.
A term (or “level term”) insurance policy could be a strategic choice, with the term set to cover the years you expect to be the primary provider.
It’s also important to consider whether you may start a family in the future. Generally, life insurance policies are cheaper for young people meaning that purchasing a policy sooner rather than later could be a financially savvy move, whether that’s single or joint life insurance.
When taking out a mortgage
When becoming a parent
When planning for the future
Do I need life insurance for a mortgage?
It is not a legal requirement to have life insurance for a mortgage.
However, some lenders might ask for a mortgage life insurance policy to be in place. This type of policy is designed to help survivors pay off the mortgage and other expenses in the event of your death.
Who doesn’t need life insurance?
If you're single with no dependents, or your partner and dependents are financially secure without your income, buying life insurance might not be necessary.
Other types of protection products (such as income protection or critical illness cover) may also be a more suitable product for some people than life insurance. These policies help you manage living costs if you’re unable to work.
What are the different types of life insurance?
There are several different types of life insurance designed to suit various needs and budgets. Here's a quick rundown:
Level-term life insurance pays out a set amount of money if you die while the policy is in place. It is often called family life insurance.
The payout remains constant throughout the policy's duration, as do the premiums. Typically the younger and healthier you are when you take out the policy, the lower your premiums will be.
The predictability of the payout is a significant advantage of this type of policy. The downside is that this insurance can be more expensive than other types, and payouts may not be adjusted for inflation.
Term life insurance is a policy with a set expiration date. It's designed to cover specific periods when financial obligations are at their peak, such as while raising a family or paying off a mortgage.
For example, you could get a term life insurance policy that cover a period of 15 or 20 years while your children are minors, so that if you die within this period the policy will pay out a sum of money that can be used to take care of them in your absence.
Decreasing term life insurance is also known as mortgage life insurance. Its payout decreases over time in line with your mortgage balance.
Premiums are generally cheaper than for level-term policies, but its not suitable for all mortgage types.
Increasing term life insurance accounts for inflation, with the payout increasing annually.
This means higher payouts, but also makes it more expensive than level or decreasing term insurance.
Joint life insurance covers both halves of a couple but only pays out after the first death. It can be more affordable than two separate policies if you and your partner are considered low risk by insurers.
However, you will need to alter the policy if you and your partner split up or get divorced.
Whole of life insurance, also referred to as life assurance, offers lifelong cover and guarantees a payout regardless of when you pass away, as long as you have consistently paid your premiums.
It is almost always more expensive than term policies. There are different types of whole of life insurance, including:
balanced cover, which has fixed premiums
maximum cover, which has variable premiums based on investment performance
Over-50s life insurance policies is geared towards older individuals who are likely to be charged very high premiums if they take out standard life insurance.
It offers a guaranteed payout regardless of when you die (as long as you consistently pay your premiums) and also guaranteed acceptance without medical exams. It is therefore suitable for people with pre-existing health conditions.
There is a risk with these types of policies that the amount it pays out may be less than you paid in.
Level term (family) life insurance
Term life insurance
Decreasing term (mortgage) life insurance
Increasing term life insurance
Joint life insurance
Whole of life
Over 50s life insurance
Our guide on life insurance policy types can help you decide which is most suitable for your circumstances.
How much does life insurance cost?
The price of your life insurance will vary, depending on which policy you choose and personal circumstances including your age and smoker status.
Policy Type | Average Cost |
|---|---|
Level term | £20.90[1] |
Decreasing term | £17.74[2] |
Remember that the cheapest option won’t necessarily be the best choice for you – always make a decision based on which product suits your needs.
How much life insurance cover do I need?
The amount of life insurance cover you need is a personal decision, influenced by factors such as income, mortgage size, and family expenses.
Our life insurance calculator can help you estimate the cover necessary to protect your loved ones.
How do I pay for my life insurance policy?
Life insurance premiums are typically paid monthly via direct debit. The cover amount you choose will influence the cost of your premiums.
Upon your death, beneficiaries can receive a lump sum or monthly payments. Some whole-of-life policies have an investment element, which can be accessed while you're alive, but it's advisable to seek professional advice before doing so.
How do I find the right life insurance policy?
MoneySuperMarket offers a platform to compare deals from UK life insurance providers, ensuring you find a policy that fits your needs and budget.
Can I get life insurance if I have a pre-existing condition?
Having pre-existing conditions might affect your premiums, but won’t usually prevent you from obtaining cover. Insurers will ask about any pre-existing medical conditions you may have. It's crucial to be honest about your medical history to ensure your policy is valid.
Why do people not take out life insurance?
People often delay purchasing life insurance because they believe it is unnecessary if they are young and healthy. Additionally, some may not see the immediate need if they do not have a family or dependents, or might be prioritising other financial responsibilities.
Even if this applies to you, it might still be worth considering life insurance. Remember, the younger you are when you take life insurance out, the cheaper it tends to be – our data suggests that the average cost of life insurance for those aged 18-49, at £18.19[3] a month, is half the price of insurance for those in the 60-64 age group (£41.17[4]).
Do I need life insurance if I have a pension?
Having a pension does not necessarily mean you don't need life insurance. While a pension supports you during retirement, life insurance is meant to provide financial support to your dependents after your passing. Whether you need life insurance depends on your specific situation, such as having dependents, a mortgage, or other debts.
Is life insurance mandatory in UK?
No, life insurance is not mandatory in the UK.
