Life insurance

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What is life insurance?

Life insurance is a type of insurance policy that can provide financial support to your loved ones when you die. It can offer this in a lump sum payment, which can help clear outstanding debts, such as your mortgage, and give your family money to live off, so your partner or children can continue to pay bills and living expenses. 

AMAZON.CO.UK GIFT CARD**

Buy your life insurance online through Compare the Market and claim an Amazon.co.uk gift card from £25 to £195**.

To claim the gift card you must make three monthly payments in a row. You’ll then be contacted within 45 days with instructions on how to claim.

Important things to note:

  • Amazon.co.uk gift card value dependent upon your monthly premium and insurance provider. See full terms and conditions.
  • Offer available for policies applied for online – please note this is an updated offer for all applications made from 1st January 2021.
  • You’ll be contacted to claim your Amazon.co.uk gift card up to 45 days after paying your third monthly premium.
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How does life insurance work?

Life insurance pays out on the policyholder’s death, typically in the form of a lump sum. It works like this: 

1. Agree an amount of cover 
Think about how much your dependents will need, based on living expenses and debts, if you’re no longer there to provide an income. 
 
2. Decide which type of policy you want 
Some policies will only pay out if you die within a fixed time period, some pay the same whenever you die, while with others the pay-out decreases or increases over time. Consider how long you want your policy to last too. 
 
3. Name the beneficiaries 
Decide who you want to receive the money on your death. Could it help your partner pay off the mortgage and household expenses, or help you leave something to your children? 


Take a look further down the page for more information on how the different kinds of life insurance work. 

What does life insurance cover?

Knowing what life insurance covers is important so that you understand how you can support your loved ones after you’re gone. It will provide a cash pay-out that will help your family cover everyday expenses, like your mortgage or rent, bills and childcare, when you’re no longer there to provide for them.

Life insurance will pay out to the people you’ve named as beneficiaries, if you die during the term of the policy – which can either be a set number of years or for the whole of your life.

Some policies may pay out early if you are diagnosed with a terminal illness and your medical team consider you have less than 12 months to live.

What deaths won’t life insurance cover?

There are a few exceptions where life cover won’t pay out on death. You’re likely not to be covered if you didn’t disclose an illness or don’t give truthful, accurate or complete answers while you were completing your application. If you don’t know the answer to a question it’s better to say so than give a wrong answer. The insurance provider can always ask your doctor for more information if needed.

You may also not be covered if your death results from some other situations, including:

  • committing suicide within 12 months of taking out a policy
  • intentional self-inflicted injuries
  • drug and alcohol abuse
  • some dangerous sports (some policies may cover this if you declare it and pay a higher premium)
  • committing, attempting or provoking an assault or criminal offence 

Each provider has their own set of rules that need to be followed, and terms and conditions will apply for a claim to be successful.  

It’s also worth knowing that life insurance only covers you for death. You will need to consider other types of cover for long-term illness, like critical illness insurance and income protection which can cover you if you can no longer work because of an accident or ill health. You may be able to add these on to your life insurance or take them out as a separate policy.

What are the main types of life insurance cover?

There’s a wide variety of life insurance policies designed to suit different needs. These are some of the most popular: 

Level-term life insurance

Pays out a fixed amount of money, for a fixed period of time, which you choose when you buy. It can help cover debts like a mortgage. If you die within the chosen time period, the policy pays out a lump sum to your beneficiaries.  But if you die after the period there’ll be no pay out, and your policy has no cash-in value at any time, unless a valid claim is made. 

Increasing cover

Because inflation might reduce the value of your cover over time, you might want increasing cover. With this, some providers offer you the choice of increasing the level of cover by a set amount every year – for example, 3% or 5% – or you can opt instead to match the level of cover to increases in the Consumer or Retail Prices Index. Your premiums will also increase to reflect the additional level of cover.  

Increasing cover can be useful to help account for increasing prices or pay rises during the term of your policy, for instance. However, you should make sure that you review your cover regularly to make sure it meets your needs.

Decreasing term life insurance

A type of fixed-term policy aimed at people whose financial commitments reduce over time – for example, if you’re repaying a mortgage. Because the pay-out reduces over time, this type of life insurance is generally cheaper than level-term insurance. As with all term life insurance policies, there’ll be no pay out if you die after the fixed term of the policy. Your policy has no cash-in value at any time unless a valid claim is made.

Whole of life insurance

Also called whole of life assurance, this is a policy that lasts as long as you do and always pays out if you die (as long as you’ve kept up with the payments). This type of policy is often used to cover inheritance tax payments. You can’t buy this type of cover on our site, but our partner LifeSearch, a specialist adviser for life insurance, will be able to help you. Give the friendly team a call on 0800 072 1147 (Monday to Friday: 8am-8pm. Saturday: 9am-2pm. Sunday: 10am-3.30pm). 

Joint life insurance

A life insurance policy that covers two people (typically, a couple), but it only pays out once. Usually, this payment will be a lump sum that goes to the survivor if the first person dies during the term of a policy. The policy ends with the first death, so the survivor will need to look for another policy if they still want cover.

Over-50s life insurance

These plans tend to offer smaller pay-outs, to cover things like funeral expenses. The amount you pay for your premium is guaranteed, so it won’t go up or down. If you live for a long time, you could end up paying more in than the policy pays out. 

Which type of life insurance cover is right for me?

This depends on your personal circumstances. There are many options, including whole of life insurance, over-50s cover, joint life policies, level term and decreasing term. It's important to compare quotes and find the right cover for you.  

You may also want to consider adding critical illness cover to your life insurance. This could pay out if you’re diagnosed with a critical illness that’s defined in the policy, instead of when you die.  

If you’re not sure about what type of life insurance is right for you, it could be worth having a chat with our partner life insurance experts at LifeSearch. 

Do I need life insurance?

While you’re not required to have life insurance, many people choose to have it because it can offer some financial security for your family if you die. The loss of your income or contribution to the household could cause financial difficulties for your family and dependants. Life insurance can provide a cash safety net to help your family pay bills and helps take away the burden of worrying about money at a difficult time. If you have a mortgage, your mortgage provider might insist that you have life insurance so they know that the mortgage can be repaid if you die. 

How much life insurance do I need?

The right level of life insurance cover for you will depend on your personal circumstances. Typically, the more cover you take out, the higher your premium will be. However, if you underestimate how much money your dependants will need, you could leave your loved ones short.  
 
Think about what income your family or dependants will need to cover their living expenses without your contribution. Consider how much would be needed to cover: 

Your mortgage or rent 

Living and household expenses 

Childcare costs

Funeral costs

Outstanding debts

Children’s education

Work out how much money your dependants might need to continue their current lifestyle and meet future outgoings. Don’t forget to take account of how circumstances will change. If a non-working partner dies, you might face additional childcare cost or costs for caring for an elderly parent. If a working parent partner dies, you may need to work fewer hours to be there for your children or other dependents.

Talk to someone

The Compare the Market life insurance comparison and telephone service is provided by LifeSearch. They can help make life insurance feel less complicated.

They're really friendly and are just at the end of the phone to help you figure out what you need. Give them a call:

0800 072 1147

Lines are open:
Monday to Friday: 8am-8pm
Saturday: 9am-2pm
Sunday: 10am-3.30pm

Life insurance calculator

Find out how much cover you might need

Life insurance calculator

How much does life insurance cost?

The average cost of life insurance varies, depending on the type of cover you’re looking for. There are many things that may affect the cost of your policy. These include your:

Age

Height and weight

Medical history (along with your family’s)

Lifestyle (for example, drinking and smoking)

Amount of cover

Policy length

Salary

To find out how much cover you need, you can start a calculation now...

Life insurance could cost from £15.25 per month^^

^^51% of customers could achieve a premium of £15.25 per month for their life insurance for a 10 year term, up to £100k worth of cover and no citricial illness cover. Based on Compare the Market data from October, 2021
 
The prices on our site are for ‘healthy' customers. If you have any medical conditions, the price you see is unlikely to be the one you'll finally receive. LifeSearch can help you if you have medical conditions: they go out to a panel of insurance providers and find the policy to best suit your needs. 

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What do I need to get a life insurance quote? 

To get a life insurance quote, you’ll need to tell us:  

  • Your name and contact details So we can give you a personalised quote. 
  • Date of birth As you get older, you may be more likely to develop health conditions. 
  • Health and lifestyle You’ll be asked about your smoking habits or if you use nicotine substitutes. 
  • How long you need cover for The longer your policy lasts, the more you’ll pay in total -  but you’ll be protected for longer. 
  • How much cover you want The higher the amount of pay-out you might need, the more you’re likely to pay. 
  • Details of any joint policyholder If you want to cover your spouse or partner, you’ll need their details too.

The list of quotes we provide will also show you optional extras you might want to consider, such as critical illness cover. 

Why use Compare the Market?

5 minutes to get a quote***

92.0% of users would recommend Compare the Market to friends or family****

***On average it can take less than 5 minutes to complete a life insurance quote through Compare the Market based on data in October 2021.

****For the period 1st June to 31st August 2021, 8944 people responded to the recommend question. 8,226 responded with a score of 6 or above, therefore 92.0% are likely to recommend.

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Debbie Thompson

Life insurance expert

What our expert says...

“The price of life insurance increases with the age of the policy holder – meaning that it’s in customers’ best interests to take out a policy earlier in life, so they’re able to reap the benefits of a cheaper premium.

However, it’s important to know that life insurance shouldn’t be treated as an investment product. It has no cash value, and only pays out when a valid claim is made.”

Get free advice about the right life insurance for you

We work with LifeSearch insurance brokers, who won’t recommend a product if it isn’t right for you. They search the market – both big and small insurance providers – including well-known brands, so you can get the right cover at the right price.

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Frequently asked questions

Does coronavirus affect my life insurance policy?

You’ll need to check the terms of your policy to see whether it will pay out if you die from COVID-19. Many policies will pay out, so long as you answered all the questions truthfully when you applied. But some policies may have exclusions for pandemics. Contact your insurance provider if you’re unsure. 

See our guide on coronavirus and life insurance.

Do you need life insurance to take out a mortgage?

It’s not compulsory, but if you’re taking out a mortgage some lenders might make life insurance a condition of lending, or strongly recommend that you have it. 

Having life insurance means the mortgage could be paid off if you die, which is sensible if you have dependants or if your partner wouldn’t be able to pay the mortgage on their own. 

You don’t have to get life insurance from your mortgage provider, you can choose a mortgage life insurance policy from any provider.

Can I get critical illness cover with life insurance?

Yes. Critical illness cover offers protection in the event of a serious illness or injury, and can typically be added to your life insurance policy or bought as a standalone policy. You can’t compare this type of cover as a standalone policy on our site, but you can select critical illness insurance as an add-on to life insurance during the quote and on the results page.  

See our guide to critical illness cover.

I have a pre-existing medical condition. Can I get life insurance?

You can get life insurance if you have a medical condition, but it may cost more. That’s because you’re considered a higher risk and the number of insurance providers willing to cover you could be limited.

When applying for life insurance with a pre-existing condition, you’re likely to be asked for details of the condition. You could also be asked to take a medical. If you fall into a high-risk category, for example you’ve had a stroke, an insurance provider might exclude death from a stroke in your policy. That means your policy won’t pay out if you die as a result of a stroke or anything stroke-related. 

Be aware that a provider could refuse to pay out for a claim if it turns out you withheld information about existing or prior illnesses or conditions when applying for a policy. 

See more about pre-existing conditions and life insurance. 

Am I covered by my employer’s life insurance?

You might be. Some companies offer their employees ‘death in service benefit’. This is usually a multiple of your salary – for example, three or four times what you earn – and is paid out as a tax-free lump sum if you die while you’re working for the company. You should be told about it when you join a company.

Is life insurance taxable?

There shouldn’t be income tax to pay on a life insurance pay-out. It could be subject to inheritance tax if the total value of your estate is larger than the tax allowance. If you don’t want your beneficiaries to pay inheritance tax on your life insurance, you should think about putting your life insurance in trust. 

You don’t have to pay Insurance Premium Tax on your regular life insurance payments, although tax legislation might change in future. 

See more on life insurance and tax and our guide to inheritance tax. 

What does it mean to put a life insurance policy in trust?

A life insurance policy in trust is a legal arrangement that keeps a life insurance pay-out separate from the valuation of your estate after you die (your estate is your property, money and possessions). If your life insurance is written in trust, it gets paid directly into the trust and doesn’t form part of your estate, so it isn’t taken into account when inheritance tax is calculated. 

Paying out the money to the named beneficiaries can also be easier as they don’t have to wait for probate to be granted. 

There are pros and cons to using a trust, so it can be a good idea to get specialist tax and legal advice if you’re considering it. See more on life insurance in trust.

Can I have more than one life insurance policy?

Yes, you can. For example, you can have your own life insurance policy and also be covered by your employer’s policy. You can take out more than one policy if your circumstances change, to cover any shortfall in your current cover. For example, if you have a second family. You can even choose different types of policies for different financial commitments, like a mortgage. 

You don’t have to buy all the policies at the same time and it’s worth regularly reviewing your life insurance cover to make sure there won’t be any shortfall.

What’s the difference between life insurance and over 50s life insurance?

The main differences between over 50s cover and standard life cover are: 

  • No medical exam - acceptance is guaranteed for over 50s life insurance, regardless of your health or lifestyle.
  • A guaranteed lump sum pay-out - unlike standard term life insurance, which is for a fixed period of time, over 50s life insurance will cover you for the rest of your life - as long as you keep up with your payments. But you’ll usually need to have paid into the policy for a minimum amount of time for it to pay out.

See our guide to over 50s life insurance.

How long should I get life insurance for?

It depends on how long your family or dependants would need financial support for, without you. For example, if you have a policy to cover your mortgage, it should match the term length and money borrowed. If you have children, it might be that you want cover until they’re financially independent. Some policies have a minimum and a maximum length, so you may need to check they fit your requirements.

When should I get life insurance?

Although it’s common to get a new life insurance policy after a major life event, like having a baby or moving house, it could be a good idea to buy life insurance sooner rather than later. That’s because providers tend to think of younger people as less risky, as they’re more likely to be healthy and therefore less likely to claim. You could be offered a cheaper insurance premium as a result.

When should I review my life insurance cover?

You should review your life insurance regularly to make sure you’re not over or underinsured. If you go through any major life change, like moving house, having a baby or divorce, you should certainly review your current policy. It's also worth making sure your final pay-out is keeping up with inflation, so it will be worth the same in real terms when it’s paid out as you intended.

What happens to your life insurance if you miss payments?

Some providers will give you a set time to make up a missed payment without your policy being affected. Others will stop cover as soon as you miss a payment.

Some insurance providers offer payment holidays but, typically, you have to make up all the missed payments at the end of the holiday. Check your policy details to see what your insurance provider says about missed payments. 

If you know you’re going to miss a payment, it’s best to get in touch with your insurance provider as soon as possible. 

If you think you might have difficulties paying your premium in the future, you could add a waiver of premium to your policy when you take it out.

What is a waiver of premium for life insurance?

A waiver of premium could cover your monthly repayments if you’re unable to work because of serious injury or critical illness. This can only be added at the start of your life insurance policy, not later. If it’s something you want to add, you’ll need to let your insurance provider know before you take out a new policy. But it might increase the cost of your premium. 

Can you claim on your life insurance policy if diagnosed with a terminal illness?

Some insurance providers could pay your life insurance claim early if you’re diagnosed with a terminal illness (typically if your doctor has given you less than 12 months to live). The exact terms may vary among providers. 

Both the insurance provider and your hospital consultant will need to say that, in their opinion, your serious illness will result in death within the set period. 

The payment is paid early to help you and your dependants cope financially during a very difficult time.

Can I cancel my life insurance policy?

Yes, you can, but you’ll no longer be covered by the policy and won’t get a pay-out if you die. You typically have 30 days to cancel a new policy without any charge. Check your policy for the exact details of what you need to do. 

Contact your insurance provider to cancel your policy. You’re unlikely to be entitled to any refund of the premiums you’ve already paid. 

What happens if I don't die before my life insurance policy ends?

If you don’t die during the term of your policy, there won’t be any pay-out and you won’t get any money back for the premiums you’ve paid over the years. 

If you’d like to extend the term of your policy, some insurance providers could arrange that for you. But you may need to complete a new health assessment, and it’s important to know that the cost of your premiums could rise, given that you’ll be older. You could try to get a quote for a new standard life insurance policy, or an over 50s life insurance policy might be an option.