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 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.

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. As part of your application, you’ll agree on the amount of cover you’d like to receive, 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 reduces over time. Take a look further down the page for more information on how these 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.

What does life insurance typically cover or exclude? 
Covered  Death during your policy term – with certain exceptions – see below 
Potentially covered 

 

Death 

Suicide or death as a result of an intentional self-inflicted injury if you’ve had the policy for at least 12 months from the start date or the date you increase your cover (but there may be other exclusions too in your policy) 

Illness/injury 

Terminal illness diagnosis where life expectancy is less than 12 months. (But many policies will not pay if a terminal illness is diagnosed during the last year of the policy term.) 

Typically not covered 

Death 

Death from excluded causes that may include: 

  • Pre-agreed conditions 
  • Drug and alcohol abuse 
  • High-risk activities – like dangerous sports 
  • Committing, attempting or provoking an assault or criminal offence 

Illness/injury

  • Total disability during your lifetime
  • Critical illness during your lifetime

However some providers may offer cover for both of these as an additional paid-for option. The specified disabilities or illnesses where a policy will pay out can vary between providers. 

Please be aware that this summary isn’t a guarantee the policy will or won’t pay out in the circumstances. Each provider has their own set of rules that need to followed and terms and conditions will apply for a claim to be successful. 
 
Your claim won’t pay out if, at the time you completed your application for the policy, or when making the claim, you fail to answer all questions truthfully, accurately and completely to the best of your knowledge and/or you do not provide all the information asked for. 

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 will 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 to add increasing cover. Here 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 may opt instead to match the level of cover to increases in the Retail Prices Index. Your premiums will increase also to reflect the additional level of cover. Increasing cover can be useful to help account for things like increasing prices or pay rises during the term of your policy. However, you should make sure that your review your cover regularly to make sure it still meets your needs.

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. As with all life insurance policies, if you die after the fixed term of the policy, there will be no pay out. 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, 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 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. 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 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.

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 create 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:

  • 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 when you pass away, they may need to work fewer hours 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 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 really 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
£15.57
per month^^

Over 50s life insurance could cost from
£19.25
per month^^^

 Average costs based on age  
Age  Average monthly premium^^^^ 
0-24  £16.28 
25-34 £23.54 
35-44 £31.89 
45-54 £35.95 
55-64 £39.37 
65+ £52.35 

^^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 March 2021 to 1 June 2021 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.  

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Average costs based on age^^^^

Age

Average monthly premium

0-24

£15.32

25-34

£23.86

35-44

£32.92

45-54

£37.08

55-64

£36.15

65+

£48.92

^^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 October 2020 to 1 January 2021 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. 

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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
  • date of birth
  • whether you are a smoker or use nicotine substitutes
  • how long you need cover for
  • how much 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.

Why use Compare the Market?

3 minutes to get a quote***

93.8% of users would recommend Compare the Market to friends or family****

***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.

****For the period 1st September to 30th November 2020, 12,477 people responded to the recommend question. 11,706 responded with a score of 6 or above, therefore 93.8% are likely to recommend.

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Kamran Altaf 

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.

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 – so 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.

See our guide on coronavirus and life insurance.

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?

You don’t have to pay any Insurance Premium Tax on your regular life insurance payments.

When a life insurance policy pays out, there shouldn’t be income tax or capital gains tax to pay. But 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 it in trust.

This is the current situation at the time of writing, but tax legislation may also 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 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. See more on life insurance in trust.

Can I have more than one life insurance policy?

Yes, you can. For example, you may have your own life insurance policy and also be 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 keep up their current standard of living. Or you may have traded up in property and need higher or longer-term 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.

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 a critical illness that’s defined in the policy, instead of when you die.

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

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

  • No medical – you won’t need a medical exam for over 50s life insurance. Acceptance is guaranteed, regardless of your health or lifestyle.
  • A guaranteed lump sum pay-out – unlike 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. However, you’ll usually have to have paid into the policy for a minimum amount of time for it to pay out.

For more information, see our guide to over 50s life insurance.

How long should I get life insurance 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 the term length and amount of money borrowed. If you have 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 would need financial support for if you weren’t 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 amount you’re looking to be covered for, the length of the policy and whether you’d like any add-ons, like 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 the life insurance provider you want, expect to be asked your age, weight and medical history, along with lifestyle factors like how much you drink and whether you smoke. 

Because providers work out their premiums differently, it makes sense to compare.

Use our life insurance calculator to work out how much cover you might need.

How to claim your £25 to £195 Amazon gift card

  1. Buy life insurance through Compare the Market (online only, not applicable for sales made over the phone through LifeSearch). T&Cs apply.
  2. Make three monthly payments in a row and you'll be eligible for the Amazon.co.uk gift card.
  3. 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. 
  4. 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 think about getting a life insurance policy.  

Although it’s common to get a new policy after a major life event – like 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.  

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?

It’s not compulsory, but if you’re taking out a mortgage some lenders might make life insurance a precondition of lending to you or strongly recommend that you get this kind of insurance.

Having life insurance means you’ll know the mortgage debt will be paid off if you die. It can be a sensible choice if you have dependants or if your partner wouldn’t be able to pay the mortgage on their own.

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.

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 or home buildings insurance 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 advisors at LifeSearch on 0800 072 1147 (Monday to Friday: 8am-8pm. Saturday: 9am-2pm. 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, like:

  • moving in with a partner or getting married
  • having a baby
  • moving home
  • changing jobs
  • getting a promotion
  • children finishing full-time education and leaving home
  • separation and divorce

You might also want to make sure that your final pay-out is keeping up with inflation, so it’ll be worth the same in real terms when it’s paid out as you intended.

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:

  • asthma
  • cancer
  • diabetes
  • epilepsy
  • heart disease, heart attacks and strokes
    obesity

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 (Monday to Friday: 8am-8pm. Saturday: 9am-2pm. Sunday: 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 it up 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 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.

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

What is a waiver of premium?

If you can’t work because you’ve been seriously injured or become critically ill, you may have difficulties paying your life insurance premium. A waiver of premium helps to protect your cover and keep your life insurance policy active by covering your monthly repayments if you’re unable to work because of serious injury or critical illness.

A waiver of premium can only be added at the start of your life insurance policy, not later on. If it’s something you want to add, you’ll need to let your insurance provider know before you take out a new policy.

Although a waiver of premium can give you extra peace of mind, the add-on ‘rider’ could push up 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 during a very difficult time.

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 if you die. 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 pay-out and you won’t receive any money back for the premiums you’ve paid over the years. 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 that you’ll likely be much older.

Top tips for cheaper life insurance

  • Start early – the younger and healthier you are, the cheaper your policy will be.
  • Put your policy in trust – it will ensure your beneficiaries won’t have to pay inheritance tax and will speed up the payment process.
  • Combine your cover – critical illness cover and income protection could give you total peace of mind and combining them with life insurance could work out cheaper than separate policies.
  • Shop around – don’t just go for price alone. Make sure you get the right cover for your individual needs. Shopping around and comparing a range of quotes can help you weigh up your options and get a better deal.
  • Review your cover – it could be that your health has improved since you first took out your cover. If you’ve made positive lifestyle changes, you might be able to find a cheaper policy now.
  • Be honest, always – don’t try to hide important health information to get a cheaper deal – it’s just not worth the risk of losing the pay-out. If you’re not sure how to answer health-related questions on your application form, ask your insurance provider to write to your GP.