Do I need life insurance?

Life insurance isn’t mandatory, but it can be worth giving serious thought to. Take a look at who needs life insurance, when you might want to get it and what it has to offer.

Mubina Pirmohamed

Insurance expert

minute read

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Posted 31 JANUARY 2020 Last Updated 28 MARCH 2022

Who needs life insurance?

Life insurance can give your loved ones financial support after you die. So, if you have people who depend on you financially – a partner, children, an elderly relative, for example – it’s something to seriously consider.

It’s also something to think about even if you’re not the main breadwinner in the family, as the loss of your contribution to looking after the home and children would have a financial impact.

How does life insurance work?

If you die while the policy is running, life insurance can give your beneficiaries – the people (or person) you’ve chosen to receive the proceeds of your policy – a lump sum. They can use this to pay bills and meet other financial commitments, or to pay off debt, including a mortgage.

Is it ever compulsory to take out life cover?

Life insurance isn’t compulsory, but if you’re taking out a mortgage, your provider might insist that you have it to cover your remaining payments if you die while the mortgage is still running.

Mortgage life insurance is often sold as a decreasing term policy. Under this type of policy, the amount your beneficiaries would receive if you die reduces in line with your total mortgage debt. Another type of mortgage life insurance is level term insurance, where the amount your loved ones would get stays fixed throughout the life of the policy.

When should I get life insurance?

People often choose to take out life insurance when they have a big life event on the horizon that also brings with it a financial commitment – like getting married, buying a first home or having a child. See more on when to get life insurance. But even if there are no big changes ahead, it’s worth reviewing your situation to see if you need life insurance.

Do I need life insurance if I'm single?

It's easy to assume that, if you're single with no children, you won’t need life insurance because no one’s relying on your income. But there are circumstances when you might benefit from cover. These include:

To cover the cost of funerals The average cost of a funeral is now £8,864, according to the SunLife Cost of Dying Report 2022. Having insurance in place could mean your family gets a pay-out to help them cover the cost of your service if the worst happens. Learn more in our guide to funeral cover.
To cover your share of a mortgage If, for example, you pay the mortgage of a shared ownership home with a friend or family member.

Who doesn’t need life insurance?

While getting life insurance can often be a smart move, it’s not necessarily for everyone. Here’s a couple of examples of people who may not need life insurance:

You’re too young – while it might seem obvious, children don’t need to take out life insurance. It’s similar with students, when your financial priorities often lie elsewhere. However, there may be an advantage in getting life insurance while you’re relatively young, as the premium is likely to be cheaper.
You’re single with no shared debts – if you’re living alone, with no dependants, and have enough savings to cover your funeral, you may decide that you don’t need to take out cover because there’s nobody who will require the financial security when you die.

Do I need life insurance if I have death in service cover?

Some companies offer death in service. This typically pays a tax-free lump sum to a beneficiary if you’re employed by the company when you die. It’s usually between two and four times your annual salary.

It may be possible to increase your death in service pay-out by agreeing to a cut in salary. But don’t forget, if you stop working for that company you won’t be covered any more, whereas a separate life policy would continue to be active (as long as you’re able to keep up with your payments).

What are the types of cover to compare?

There’s a few different types of life insurance to think about.

A level term policy pays out a set amount, either as a lump sum or a regular income, if you die within an agreed period.
Decreasing term insurance also pays out if you die within a set period, but the pay-out decreases over that period. It’s often used to pay off a mortgage where the amount owed also decreases over time.
Whole of life insurance provides a guaranteed pay-out, whenever you die, provided you’ve kept up with your payments.
Over 50s life insurance is available to people aged between 50 and 80. It can pay out a lump sum to cover funeral costs or bills, or to leave to your loved ones. Over 50s life insurance offers guaranteed acceptance – so you won’t have to answer any questions about your health.

Ultimately, the life cover that works for you will depend on your individual needs.

Are there other types of insurance I might need?

As well as life insurance, there are other types of policies that can help you financially if you’re unable to work:

Income protection insurance – can provide you with an alternative tax-free income to cover your outgoings if you’re unable to work because of illness or injury.
Critical illness cover – offers financial protection if you suffer from a serious illness or injury specified in your policy that leaves you unable to work.
Mortgage protection insurance – a form of income protection insurance, this allows you to continue making your mortgage repayments if you lose your job or become ill and unable to work.

What factors affect the cost of life insurance?

Factors affecting the cost of a policy include:

The amount of money you’d like your loved ones to receive: generally speaking, the more cover you have, the more your beneficiaries will get – but your premium will be higher.
Your age: as you get older, you can expect to pay more for a premium.
Your health: if your family has a history of serious illnesses, then you can expect your policy to cost more. The same goes if you have any pre-existing medical conditions when you apply for life insurance.
Your lifestyle – if you smoke and/or drink, it’s likely to impact the cost of life insurance.