Life insurance

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[1] Correct as of March, 2022

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.   

Why do I need it?

  • Offers peace of mind for your family if you die 

  • It’s a cash safety net to pay bills  

  • Makes up for your lost income 

  • Helps to pay an outstanding mortgage   

  • Eases worry at a difficult time.  

How does life insurance work? 

Life insurance pays out on the policyholder’s death, typically in the form of a lump sum. It will pay out to the  people you’ve named as beneficiaries, if you die during the term of the policy – which can be a set number of years or the whole of your life.  

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 works best for you

Some polices will only pay out if you die within a fixed period, some pay the same whenever you die, while with others the pay-out decreases or increases over time. Some policies will pay a lump sum, while others provide a monthly income.

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.

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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 May until 30th June 2022.
  • 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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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.

Deaths covered Deaths possibly covered Deaths not covered Illness/injury not covered
Most common causes of death Suicide (if you’ve had the policy for at least 12 months from the start date or the date you increase your cover) or self-inflicted injury Pre-agreed conditions Total disability in your lifetime unless added
Cancer Drug and alcohol abuse
Heart attack High-risk activities – like dangerous sports
Accidental death Committing a criminal offence or provoking an assault
Unexpected illness Death if information given when applying for the policy was untruthful or inaccurate 


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

Does life insurance cover serious illness?

No, life insurance only covers you for death. You’ll need to consider other types of cover for long-term illness, like critical illness insurance, which could pay out if you’re diagnosed with a critical illness that’s defined in the policy, instead of when you die. Or income protection, which offers cover 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 are a different types of life insurance policies designed to suit different needs. These are some of the most popular:

Level-term life insurance

Decreasing term life insurance

Advantages of Level Term life insurance

  • Fixed premiums so you know what you’ll be paying.  

  • You know how much your loved ones will get.  

Disadvantages of Level Term life insurance

  • Can be more expensive.  

  • Set pay-out ignores effect of inflation in real terms.  

  • No pay-out if you die after the policy term.  

Find out more about level-term life insurance

Advantages of Decreasing Term life insurance

  • Can be cheaper than level-term insurance 
  • Works well to protect a repayment mortgage 

Disadvantages of Decreasing Term life insurance

  • Size of pay-out decreases over time 
  • Takes account of mortgage but no other financial commitments 
  • No pay-out if you die after the policy term

Find out more about decreasing term life insurance

Other types of life insurance

Increasing cover 

This offers protection against inflation. You may be able to choose to increase your level of cover by a set amount every year or opt to match increases in the Consumer Prices Index or Retail Price Index. Your premiums will increase to reflect the additional level of cover.   

Best for: taking account of increasing prices, pay rises or growing financial commitments during the policy term. 

Whole of life insurance 

This is a policy that lasts as long as you do and always pays out when you die (as long as you’ve kept up with the payments).   
  
You can’t buy this type of cover on our site, but our specialist life insurance partner LifeSearch will be able to help you. 

Best for: covering inheritance tax payments. See more on whole of life insurance 

Joint life insurance

A policy that covers two people but 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 the policy.  

Useful for: couples to cover a mortgage – but you may get better value from two single life policies so check carefully. See more on joint life insurance

Over-50s life insurance

These plans, which don’t require you to answer health questions, tend to offer smaller guaranteed pay-outs. 
  
But if you live for a long time, you could end up paying more in than the policy pays out. 

Best for: over-50s to cover funeral costs, bills or to leave a small gift. See more on over-50s life insurance.

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 dependants.

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

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Life insurance calculator

How can I get cheaper life insurance?

While price is always a consideration, the cheapest life insurance isn’t always the best life insurance. The best-value policy will be one that offers the level of cover you need at a price that suits you. Here’s a few tips to help ensure you don’t pay over the odds for your life insurance policy: 

The earlier, the better

Taking out life insurance when you’re still young and healthy will cost less than starting a policy in later life.

Be honest

When it comes to insurance, it’s never wise to be economical with the truth. A few white lies or omissions might get you a cheaper premium, but your beneficiaries might lose any pay-out due and could end up with nothing. If you’re not sure how to answer certain questions, ask your insurance provider to clarify.

Stay healthy

We’re not here to tell you how to live, but healthier lifestyle choices like exercising, a well-balanced diet and not smoking, could make you a lower risk for insurance providers, which, in turn, could mean cheaper premiums.

Buy life insurance with critical illness cover

combining critical illness cover with your life insurance can often work out cheaper than buying two separate policies. 

Put your life insurance in trust

This gives you greater control over who benefits, and can help them avoid paying inheritance tax if your estate is worth more than £325,000.

Check your cover every now and then

You should review your life insurance policy to make sure it still meets your needs, especially if you’ve undergone any major changes like marriage, new family members or divorce. 

Shop around

As well as the price, check the cover levels and exclusions of different policies, so you can be sure you’re getting value for money.

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...

How much does life insurance cost?^^
Amount insured Monthly premium Annual premium
£100,000 £14.99 £179.88
£175,000 £18.09 £217.08

^^51% of customers could achieve a premium of £14.99/£18.09 per month for their life insurance for a 10 year term, up to £100k/£175k worth of cover and no critical illness cover. Based on Compare the Market data from March, 2022. 
 
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’ll consult a panel of trusted insurance providers to find a policy that suits your needs.  

According to the Association of British Insurers (ABI), 98% of all life insurance claims were paid in 2021, totaling a record £6.8 billion.

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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:  

  1. Your name and contact details so we can give you a personalised quote.   
  2. Date of birth: as you get older, you may be more likely to develop health conditions.   
  3. Health and lifestyle: you’ll be asked about your smoking habits or if you use nicotine substitutes.   
  4. 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.   
  5. How much cover you want: the higher the amount of pay-out you might need, the more you’re likely to pay.   
  6. 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.

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***Correct as of March, 2022.

^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.

Author image Faith Archer

What our expert says...

“No one want to think about dying, but life insurance can help protect your loved ones financially if the worst happens.  

“Consider how much your family would need to get by if you weren’t around. Clearing the mortgage might not be enough if they couldn’t afford food and heating.  

“The good news is that if you compare life insurance quotes, you’ll find that the younger you are when you take out a policy, the cheaper it’s likely to be.”

- Faith Archer, Insurance expert

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. 

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 dependents 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 have a medical examination. 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 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 dependents 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’s the best time to get life insurance?

Although it’s common to get a new life insurance policy after a major life event, such as 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, moving in with a partner, getting married, having a baby or getting divorced, 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.