What are the different types of life insurance?
Key takeaways
Life insurance most often refers to term life insurance, which provides cover for a specific amount of time, but you can also get ‘whole-of-life’ insurance which pays out regardless when you die
Term life insurance is generally split into level term (payout remains the same), decreasing term (payout decreases over time), and increasing term (payout rises with inflation).
You can structure your life insurance as a joint life insurance policy and add on other types of protection insurance such as critical illness cover
What are the main types of life insurance?
Life insurance can provide valuable protection for your family when you are no longer around. There are various life insurance policies to choose from.
Here we look at some of the different versions in a little more detail.
Term life insurance
Term life insurance is the most common form of life insurance. It tends to be cheaper than ‘whole-of-life’ as it covers you for a specified number of years (say, 25 years). The average price of life insurance sold through MoneySuperMarket is £35.02
Term life insurance pays out a lump sum if you die during your policy period. This payout can be used however your beneficiaries choose. It is often put towards a specific cost, such as an outstanding mortgage, or used to cover the cost of raising a child, providing financial support for their living expenses, childcare, education and so on.
You will usually need to answer medical questions in order to qualify. Typically, the younger and healthier you are when taking out the policy, the lower your premiums will be.
Term life insurance falls into three different types: decreasing term, level term and increasing term.
Level term life insurance
With this version, you decide how much cover you need at the beginning of the policy, and both premiums and the payout remain constant for the duration of the policy. It may be an option worth considering if you have children who depend on you financially. The downside is that it can be more expensive than other types, plus payouts may not be adjusted for inflation
Decreasing term life insurance
With this option, the amount paid out when you die goes down over time. It is commonly taken out to cover a repayment mortgage, with the payout decreasing over time in line with your mortgage balance. Premiums are generally cheaper than for ‘level term insurance’ and for some, it can be a cost-effective option
In the past three months (between January and March 2026, 36%
Increasing term life insurance
The potential payout rises every year by a fixed amount for the duration of the policy, helping to protect against inflation. This means higher payouts, but also makes it more expensive than level or decreasing term insurance
📣 Did you know? The cost of raising a child to age 18 is £260,000 for a couple, according to the latest figures in the 2024 ‘Cost of a Child’ report from the Child Poverty Action Group.
Whole-of life insurance
This type of cover guarantees a payout no matter when you die, unlike term life insurance, which only covers a set period. Premiums are typically paid for life. As payouts are guaranteed, the amounts are typically smaller than those for term insurance.
Some whole-of-life policies have fixed premiums that do not go up, while others are reviewed each year, and there may be changes to both the premium and the payout.
Over 50s life insurance
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 is type of a ‘whole-of-life’ insurance policy as it’s designed to cover you for the remainder of your life. It offers a guaranteed payout regardless of when you die (as long as you consistently pay your premiums) and it typically doesn’t require any medical checks. It is therefore suitable for people with pre-existing health conditions.
Tread carefully with over 50s life insurance though, as there is a risk the total premiums paid over time can exceed the eventual payout.
Joint life insurance
Is not a separate type of cover in itself. It is a way of structuring a policy for two people.
It covers a couple under a single policy, typically paying out on the first death – after which the policy ends.
You can usually choose joint cover with different forms of life insurance, including ‘term life insurance’ and ‘whole-of-life’ cover. A couple might, for example, decide to take out a ‘joint decreasing term policy’ to cover a repayment mortgage, or a ‘joint whole-of-life policy’ for estate planning purposes.
It can be more affordable than taking out two separate policies, though premiums will still depend on factors such as you age, health and lifestyle.
If you and your partner separate – or divorce – you may need to review and amend the policy to ensure it still meets your needs.
How do I choose the right life insurance?
When thinking about the right type of life insurance for you and your loved ones, the following points are worth considering:
Your budget
The amount of overall cover you would like
Your financial outgoings, and how much these would be without your income
Any other assets you own, such as other property or investments
How long you would like cover for
📣 Did you know? An estimated 29,600 parents die every year in the UK, leaving dependent children. That’s one parent every 20 minutes, according to the Childhood Bereavement Network.
What is the difference between ‘life insurance’ and ‘protection insurance?’
Life insurance is a type of protection insurance that pays out if you die during the policy term.
Protection insurance is a broader category that also includes products such as critical illness cover, income protection and family income benefit. These are products designed to provide financial support if illness, injury or death affects your finances.
Critical illness cover
While critical illness cover is usually bought as a life insurance add-on, you can also purchase it as a standalone product.
It is designed to pay a tax-free lump sum if you’re diagnosed with a severe medical condition, such as cancer, heart attack or stroke. Policies often cover dozens of illnesses, but definitions vary, so be sure to check the details.
You can choose between a ‘combined life insurance and critical illness policy’ which usually pays out for either a qualifying critical illness or death.
Alternatively, some insurers offer additional or standalone critical illness cover, allowing for two separate payouts under different policies.
Premiums depend on age, health and the amount of cover.
As it’s more far more likely that someone will suffer a serious illness – as opposed to dying young – critical illness cover tends to be more expensive than life insurance.
If you’re in a couple, you can opt to buy a ‘joint policy.’ But do your research, as separate cover often offers better value.
36%
Terminal illness cover
Note that critical illness cover is different from ‘terminal illness cover’. This is part of a life insurance policy which pays a tax-free lump sum if you get diagnosed with a terminal illness, helping to cover medical costs and living adjustments.
Where can I find cheap life insurance quotes?
If you’re looking to find the right life insurance policy for your needs, then MoneySuperMarket can help you do this quickly and easily. With just a few details, we can provide you with tailored quotes from a range of UK providers. We are here to help you navigate the complex landscape of life insurance.
Life insurance is not just a financial product; it's a commitment to the well-being of those you cherish most. Take the time to choose wisely, and get the peace of mind of knowing your loved ones will be protected and financially secure at the time when they need it most.
Author
Esther Shaw
Money expert
Esther Shaw is an award-winning consumer, financial and property journalist with more than two decades of experience. As a freelance writer, she regularly contributes to a range of national titles...
Reviewer
Beth Leslie
Senior Insurance Content Editor
Beth is an experienced writer and editor who specialises in financial and economic content. She is currently the Senior Insurance Content Editor for MoneySuperMarket. Beth is passionate about making...
