What is life insurance?
Life insurance is a type of insurance policy that can provide financial support to your loved ones when you pass away. 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.
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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.
How does life insurance work?
Life insurance pays out on the policyholder’s death, typically in the form of a lump sum. You’ll agree on the amount of cover you’d like to receive through your application, along with the people you’d like to list as the beneficiaries. The pay-out remains a set amount whenever you die, if you’re taking out a level term or whole of life policy. But if you opt for a decreasing term policy, the amount would reduce over time. Take a look further down for more information on how these different kinds of life insurance work.
What does life insurance cover?
Knowing what life insurance covers is important to understand how you can support your loved ones after you’re gone. We’ve put together this useful guide, so you can get the right cover to suit your needs.
|Covered||Possibly Covered||Not Covered|
Common causes of death
|Terminal illness diagnosis||
Death from excluded causes
(clauses covering if and when suicide is covered are common)
|Critical illness or injury|
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, the policy won’t pay out.
Decreasing term life insurance is 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.
Whole of life insurance, also called whole of life assurance, 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 monthly payments). This type of policy is often used to offset 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 Thursday 8am-8pm. Friday 8am-7pm. Saturday 9am-2.30pm. Sunday 10am-3.30pm).
Joint life insurance is 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, which goes to the survivor if the first person dies during the term of a policy. When the policy ends with the first death, there’s no further life cover for the survivor and they’ll have to look for another policy if they still want cover.
Over-50s life insurance plans tend to offer a smaller payout to cover things such as 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.
Do I need life insurance?
While you’re not required to have life insurance, many people choose to have life insurance because it offers a form of financial security for your family if you die. The loss of your income or contribution to the household could create financial difficulties for your family and dependants. Life insurance can provide a cash safety net to help your family pay bills and helps relieve 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, then 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:
- a funeral
- your mortgage or rent
- any outstanding debts
- living and household expenses
- childcare costs and expenses, including your children’s education.
Work out how much money your dependants might need to continue their current lifestyle and meet future outgoings. Remember, you won’t be in the equation, so there may be additional expenses. For example, if you’re a non-working parent or part-time worker, there may be additional costs that mount up because you aren’t around to look after children or an elderly parent. If your partner is working full time, they may need to work less if you die to be there for your children or other dependants.
Our easy-to-use life insurance calculator can help you work out how much cover you might need.
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 just at the end of the phone to help you figure out what you need. Give them a call:0800 072 1147
Monday-Thursday 8am-8pm; Friday 8am-7pm;
Saturday 9am-2.30pm; Sunday 10am-3.30pm
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:
- Height and weight
- Medical history (along with your family’s)
- Lifestyle (for example, drinking and smoking)
- Amount of cover
- Policy length
To find out how much cover you need, you can start a calculation now...
Life insurance could cost from
Over 50s life insurance could cost from
Average costs based on age^^^^
Average monthly premium
^^50% of customers could achieve a premium of £15.57 per month for their life insurance for a 10 year term, up to £100k worth of cover and no critical illness cover. Based on Compare the Market data from November 2020.
^^^50% of people could achieve a quote £19.25 per month for their over 50s life insurance or less based on Assured Futures data in November 2020.
^^^^Our average life insurance prices are based on all our customer quotes for each age group stated. They cover a mix of personal circumstances, as well as different types and levels of cover. All average premiums are based on Compare the Market data from 1 June 2020 to 1 September 2020 where the customer has clicked through to buy from the life insurance provider. You may find a cheaper or more expensive quote based on your personal circumstances.
The prices on our site are for ‘healthy' customers, so if you have any medical conditions the price you see is unlikely to be the one you will 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.Get a quote
Frequently asked questions
How does coronavirus affect my life insurance policy?
If you’ve got an existing life insurance policy, you’ll need to check the terms of the policy as to whether it will pay out if you die after contracting COVID-19. Many policies will pay out - as long as you answered all questions truthfully when you applied - as coronavirus wasn’t part of the standard exclusions before the pandemic. However, after the SARS outbreak, some insurance providers introduced exclusions for pandemics on new policies. If it’s not clear whether you’re covered, contact your insurance provider for help.
Am I covered by my employer’s life insurance?
It depends. Some companies offer their employees what’s known as 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 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?
Can I have more than one life insurance policy?
Yes, you can. For example, if you have your own life insurance policy and you’re covered by your employer’s policy. You may also want to 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 and you want to make sure your dependants can maintain their current standard of living. Or you may have traded up in property and need higher or longer life insurance.
You might even choose different types of policies for different responsibilities. For example, decreasing term for your mortgage, level term to cover your salary and other financial responsibilities, whole of life for any potential inheritance tax bill and an over 50s plan to pay for your funeral costs. But don’t forget to take account of what any existing policy will pay out when calculating what extra cover you’ll need.
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.
Which type of life insurance cover is right for me?
The type of life cover that’s right for you will depend on your personal circumstances. There are many options including whole of life insurance, over-50s cover and joint life policies, so 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 can pay out if you’re diagnosed with critical illnesses that are defined in the policy, instead of on your death.
You need to think about how much money you need to protect your dependants and their ongoing financial needs, together with what’s affordable for you.
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.
What length of policy should I go for?
That will depend on what you want your life insurance to cover. If, for example, you have a policy to cover your mortgage, then it should match that. If you’ve got children, you may want your policy to cover you until they’ve finished education, left home and can make their own way in the world. But you may need to make sure your partner is supported for the rest of their lifetime.
Essentially, you’re trying to work out how long your family or dependants will need financial support without you there, making your usual contribution. Some policies have a minimum and a maximum length, so you may need to check that they fit with what you need.
How are policy premiums calculated?
The cost of your life insurance premium is based on the sum you’re looking to be covered for, the length of the policy and whether or not you’d like any add-ons, such as critical illness cover. Each provider has its own set of criteria that determines how your premium will be calculated.
When you apply for life insurance, you’ll be asked a set of questions to help providers identify the risk they’re taking on, so they can work out how likely it is that they’ll have to pay out.
Once you’ve selected your preferred life insurance provider, expect to be asked your age, weight and medical history, along with lifestyle factors such as how much you drink and whether or not you smoke.
Because providers work out their premiums differently, it makes sense to compare.
How to claim your £25 to £195 Amazon gift card
- Buy life insurance through Compare the Market (online only, not applicable for sales made over the phone through LifeSearch). T&Cs apply.
- Make three monthly payments in a row and you'll be eligible for the Amazon.co.uk gift card.
- Within 45 days of your third monthly payment, our partner The Marketing Lounge Partnership (MLP) will email you with details on how to claim your voucher.
- You're ready to spend your Amazon.co.uk gift card. Any questions? Contact our partner The Marketing Lounge Partnership (MLP) on: 01565 656 487 (lines are open 9.00am to 5.30pm Mon to Fri)
or email: [email protected]
When should I think about getting life insurance?
Whatever your age, as an adult it’s always a good time to start thinking about life insurance. In particular, people with loans, mortgages and financial dependants should consider getting a life insurance policy.
Although it’s common to get a new policy after a major life event – such as having a baby or moving house – it can 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. So, you could be offered a cheaper insurance premium.
So whatever stage of adult life you’re at, there isn’t a better time than now to shop around for peace of mind.
Do you need life insurance to take out a mortgage?
If you’re taking out a mortgage, you might want to consider life insurance so that you know the mortgage debt will be paid off if you die. While it’s not compulsory, it can be a sensible choice if you have dependants or your partner wouldn’t be able to pay the mortgage on their own. Life insurance could pay off the mortgage so they wouldn’t have to sell up.
Some lenders might make life insurance a precondition of giving you a mortgage or strongly recommend that you get this kind of insurance. If you don’t have children, getting a policy that gives you income replacement if you can’t work through accident or illness might be more suitable. Your mortgage provider will definitely insist on buildings insurance.
But it’s worth knowing that you don’t have to get either life insurance or buildings insurance from your mortgage provider – you can choose a mortgage life insurance policy from any provider that’s right for you and your family.
You’ll need to work out whether you just want your life insurance to cover your mortgage or if you want your dependants to get a pay-out on top too.
If you need help to compare the various options and policy details, contact one of the advisers at LifeSearch on 0800 072 1147 (Monday-Thursday 8am-8pm; Friday 8am-7pm; Saturday 9am-2.30pm; Sunday 10am-3.30pm.
When should I review my life insurance cover?
You should review your life insurance regularly to make sure you’re not over or underinsured.
It’s particularly worthwhile doing this at times of major changes in your life, such as:
- the birth of a child
- moving home
- changing jobs
- getting a promotion
- children finishing full-time education and leaving home
- separation and divorce
You might also want to ensure that 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. V
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 is not taken into account when inheritance tax is calculated. Paying out the money to the named beneficiaries can also be easier as you don’t have to wait for probate to be granted.
There are pros and cons to using a trust. See more on life insurance in trust.
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. But you still should be able to find protection if you have a medical condition like:
- heart disease, heart attacks and strokes
Some insurance providers don’t offer cover for anyone with type 2 diabetes, but will offer cover for type 1 diabetes if you can show you’ve managed your condition well over time. If you have diabetes, you could find cover if you shop around, but you may have to pay more.
When applying for life insurance with a pre-existing condition, you’re likely to be asked for more details of the condition. For example, if you’ve had surgery for a heart problem, you might be asked what medication you’re taking. 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, so wouldn’t pay out if you die as a result of a stroke or anything stroke-related.
See more about pre-existing conditions and life insurance.
Also, it’s important to be aware that a provider could refuse to pay out for a claim if it turns out that you withheld information about prior illnesses or conditions when applying for a policy. It’s important to read and understand all the terms and conditions of the policy so there are no surprises for your dependants if they need to make a claim.
If you have a pre-existing condition, it’s worth talking to our expert team at LifeSearch to explore your options. You can call them on 0800 072 1147 (Mon-Thurs 8am-8pm, Fri 8am-7pm, Sat 9am-2:30pm and Sun 10am-3.30pm).
What happens to your life insurance policy if you miss payments?
If you miss a payment on your life insurance policy, some providers will give you a set time to make up the missed payment without your policy being affected. If you don’t make up the payment within the set time, your policy will be cancelled. Other providers will stop all cover on your plan as soon as you miss a payment.
Some insurance providers offer payment holidays but, in general, you have to make up all the missed payments at the end of the holiday.
You need to check your policy details to see what your insurance provider says about missed payments.
If you know you’re going to miss a payment on your life insurance, it’s always best to get in touch with your insurance provider as soon as possible to resolve the issue.
Missing a payment may also affect your credit score.
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 (if your doctor has given you less than typically 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 during a very difficult time.
What do I need to get a life insurance quote?
To get a life insurance quote, you’ll need to tell us:
- your name
- date of birth
- whether you are a smoker or use nicotine substitutes
- the length of cover you need
- how much you cover you want
- any joint policyholder details
The list of quotes we provide will also show you optional extras you might want to consider, such as critical illness cover.
Can I cancel my life insurance policy if I decide I no longer need it?
Yes, you can, but you’ll no longer be covered by the policy and won’t get a pay-out on your death. If you’ve just bought a policy, you generally have 30 days to cancel without any charge. Check your policy for the exact details and 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. And don’t forget to cancel your direct debit if you pay that way. You shouldn’t be charged a fee or penalty for ending your policy early.
What happens if I don't die before my policy ends?
If you don’t die during the term of your policy, there won’t be any payout. If you’d like to extend the term of your policy, many insurance providers can arrange that for you. However, it’s important to know that the cost of your premiums may rise, given you’ll likely be at a much older age.
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***On average it can take less than 3 minutes to complete a life insurance quote through Compare the Market based on data in November 2020.
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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 best 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 entire market – both big and small insurance providers – including well-known brands, so you can get the right cover at the right price.