Protection insurance explained Life insurance

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A life insurance policy can help you provide for your family, pay off your mortgage or cover an IHT bill if you die

What is life insurance?

Life insurance is one of the most straightforward types of protection insurance as, put simply, it pays out when you die. There are two main types of life insurance:

  • Term assurance: covers you for a fixed period of, say, 10 years and pays out if you die during this period.
  • Whole-of-life policies: these policies continue indefinitely and pay out when you die, regardless of when that happens.

There are many different reasons why you might take out life insurance. You might want to ensure your mortgage is paid off if you die, or your main concern might be to leave behind money for your family to live on. Some people take out whole-of-life policies to cover an expected inheritance tax bill when they die.

Looking to buy life insurance?

If you decide you need advice, make sure you consult an independent life insurance broker.

Which? Financial Services can refer you to an impartial, no-obligation third-party advice service to provide you with the best life insurance or mortgage insurance policy tailored to your individual needs. 

Find out more about the life insurance referral service at Which? Financial Services.

Types of term assurance

With term insurance you choose the amount you want to be insured for and the period for which you want cover. If you die within the term, the policy pays out to your beneficiaries. There are two main types of term assurance:

  • Level-term: The amount you're covered for remains level throughout the term. The monthly or annual premiums you pay usually stay the same, too. Level-term policies can be a good option for family protection, where you want to leave a lump sum that your family can invest to live on after you've gone.
  • Decreasing-term: The amount you're covered for decreases over the term of the policy. These policies are often used to cover a debt that reduces over time, such as a repayment mortgages. Premiums are usually significantly cheaper than for level-term cover.

How do I buy life insurance?

We think it's worth taking independent professional advice before buying life insurance, particularly if you're seeking to cover an inheritance tax bill. However, if you would rather buy direct, there are lots of ways to cut the cost, including cashback sites, online brokers, price comparison sites and going direct. 

We've pulled together the best ways to save on life insurance in our guides Buying cheap life insurance direct and Cut the cost of life insurance.

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