Finding the best life insurance policy for you

Life insurance is all about making sure that the people you love the most are well looked after financially should the worst happen. You can usually opt for either a policy that pays out a lump sum to your beneficiaries or provides them with a monthly income. But how are you supposed to know which is the best policy for you? 


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What’s the right policy for my needs?

There are a few different options, but the primary choice is between term life insurance policy or a whole of life policy. Term policies are set for an agreed period such as 5, 10 or 25 years. It means that if you were to pass away within the policy period then your beneficiaries will receive a pay-out. However, if the worst happened after the term expires then your beneficiaries won’t receive anything.

Whole of life policies cover the whole of your life rather than a pre-determined policy term. These ones tend to be more expensive than term policies, and you may need to speak to a financial advisor if this is what you’re after.

The best life insurance policy is the one that meets your needs. We’ve got some examples of the products people have chosen based on their circumstances to help you to navigate the world of life insurance.

Level term insurance

You can get two types of term life insurance – level term and decreasing term. For more detail, read our Introduction to term life insurance. But in a nutshell, level term insurance offers the same pay-out throughout the entire term of the policy.

Level term cover isn’t just about paying off large debts, the money can be used for your funeral costs and you can leave enough for the family to meet everyday expenses (and perhaps a bit more). A good example can be seen with Sharon:


Sharon’s case study**

Sharon and her partner live in Hertfordshire – they’re in their early 50s and have five children between them with the youngest being 18 years old. They have no mortgage or debts and were just looking for some life cover until their late 80s to cover costs and leave a bit extra for each other if they die.

After talking with their advisor, they agreed to each have a £50,000 level term life policy until their late 80s. Sharon also added £60,000 of level term life cover to split between her three children if she died during the term of the plan.

Decreasing term insurance

Decreasing term life insurance offers cover that gradually reduces over the course of the policy term. For example if you were to take out £100,000 cover, it would pay this out in the first year, and gradually decrease until the end of the policy as your outgoings reduce. You may want this if you have a repayment mortgage where the outstanding capital debt gets smaller with time – like in Stephen’s case:


Stephen’s case study**

Stephen from Wokingham is married without children and recently bought a new house with a £260,000 mortgage over 35 years. Stephen and his spouse are both in their mid-20s and work full time; they wanted security if the worst happened and either of them passed away leaving the other with the mortgage still to pay.

While both receive death in service benefit from their employers, they wanted something specifically for the mortgage and decided on a decreasing term insurance policy that would clear the remaining balance of their current mortgage if either should pass away during its term. The application was completed and accepted immediately with a specified start date to match the mortgage exchange date.

Other considerations

It’s not just life insurance – if you have young dependents and you lost your job through illness, you need to know that life can carry on whilst you get better. So you may want to consider adding on additional cover such as critical illness cover – like in Ben’s case study:


Ben’s case study**

Ben and his wife are from Cambridgeshire and have two children under 7 years old and a new repayment mortgage of £260,000 over 33 years. The couple are in their late 30s, work full time and have no existing cover but wanted the mortgage cleared if either of them were to pass away. They also wanted some additional support towards the cost of raising the children or a short term cash injection if they were to be seriously ill.

Ben has 12 months’ sick pay via his employer but wasn’t clear on his wife’s employee work benefits. They needed their solution to be affordable as well as providing support at the worst possible time.

After discussing various options with their advisor, Ben and his wife agreed on joint decreasing life cover to clear their current mortgage if either died. Plus, a smaller, additional, combined life and critical illness policy to contribute towards household bills, funeral or medical expenses (dependent on their circumstances) if either of them passed away or suffered an insured critical illness.

Want to know more?

As you can see, there’s no one size fits all and your life insurance policy will be as unique as you are. If you’ve got any other burning life insurance questions, visit our Life insurance pages where you can find out more.

You can also speak to our team at LifeSearch where one of their advisors can help you figure out just what you need. Give them a call on 0800 072 1141 (Mon-Fri 8am - 8pm Sat 9am - 2.30pm).

But if you know what you want then why not start a quote today, you might be surprised at how little peace of mind could actually cost.

**These are representative examples, data sourced September 2016

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