We use cookies to allow us and selected partners to improve your experience and our advertising. By continuing to browse you consent to our use of cookies. You can understand more and change your cookies preferences here.

What is life insurance?

There are several different kinds of life insurance. We'll show you what they are and help you navigate the jargon.

In this article
What is life insurance? What are the different types of life insurance?
Can I buy cheap life insurance? Get life insurance and protection advice

What is life insurance?

Life insurance is a financial product that enables you to leave behind money for your family when you die.

This can be used to support them for a number of years, to replace lost income, or to pay off a large debt such as your mortgage.

You pay a monthly premium for life insurance. Your age, health, lifestyle and how much cover you need, as well as the type of policy you have, will all determine how much you pay.

In this guide, find out more about the different types of life insurance, how they work, and how to find cheap life insurance.

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.

What are the different types of life insurance?

Term assurance

The most basic type of life insurance is called term life insurance, where 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. If you don't die during the term, the policy doesn't pay out and the premiums you've paid are not returned to you. 

There are three main types of term assurance to consider – level-term, decreasing-term and increasing-term insurance. Sometimes a combination of the two is the best answer.

  • Level term:  pays out a lump sum if you die within the specified term. The amount you're covered for remains level throughout the term – hence the name.
  • 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 mortgage
  • Increasing term: the amount you're covered for increases over the term of the policy, to keep up with inflation so that your family can make the most of your payment. 

Find out more about this type of cover in our guide to term life insurance explained.

Family income benefit policies

Family income benefit insurance is a type of decreasing term policy. Instead of a lump sum, though, it pays out a regular monthly income to your beneficiaries until the policy's expiry date if you die.

Find out more in our expert guide to family income benefit insurance explained.

Whole-of-life policies

As the name suggests, whole-of-life policies are ongoing policies that pay out when you die, whenever that is.

Because it's guaranteed that you'll die at some point (and therefore that the policy will have to pay out), these policies are more expensive than term assurance policies, which only pay out if you die within a certain timeframe.

Find out more in our guide to whole-of-life insurance explained.

Can I buy cheap life insurance?

It's not just banks, building societies and insurers that sell life insurance nowadays. High street retailers and supermarkets are also worth considering.

Quite often, one company sells another's life insurance policies - for example, Nationwide Building Society sells Legal & General life insurance policies, while Virgin Money sells Friends Provident policies.

The price you'll pay will vary depending on where you buy it, even where the underlying product is identical and provided by the same insurer.

A word of warning here - getting cheap life insurance doesn't necessarily mean you'll be getting good cover that's properly tailored to your circumstances. 

Speaking to a professional financial adviser about your life insurance needs can help ensure you find the right policy and the right level of cover. 

Online life insurance brokers

Online insurance brokers, such as Godirect.co.uk may be able to offer cheaper prices as they pay back to you some or all of the commission they receive from insurers.

It's also worth getting quotes from Cavendish Online – it works on a different basis to other brokers, offering a choice of paying by a commission or through an upfront £25 fee when you take out a policy.

In the latter case, the company rebates you all the commission throughout the term, reducing the ongoing premium. It's worth checking the overall cost of both options.

However, you'll only get this commission rebate if you choose to buy life insurance without financial advice.

Price comparison sites

One way to compare different life insurance providers is to use a price comparison website like Moneysupermarket.com, Comparethemarket.com or Confused.com.

Make sure you visit a selection of sites as no individual site covers the whole market, and the same insurer may offer a better deal through one comparison site compared with the others.

Remember, the prices you see on a comparison site may not be the price you get when you finally apply for life insurance, after a medical questionnaire has been completed. 

Find out more in our guide to price comparison sites

Cash back websites

If you buy life insurance online, cashback sites, such as Quidco and TopCashback, may help you get an even better deal. You're not buying the insurance policy from the cashback site but rather accessing the insurer's own website through the cashback site.

The cashback site rebates to you some of the commission it receives from the company selling the insurance.

Find out more in our guide to cash back websites.

Get life insurance and protection advice

Which? Financial Services Limited, part of the Which? Group, can refer you to our trusted partner to help you find insurance for your needs. Find out more at Which? Financial Services