Life insurance
Compare life insurance quotes with Neilson[1] to get the cover you need
What is life insurance and do I need it?
Life insurance pays out a lump sum to your loved ones if you pass away or are diagnosed with a terminal illness while your policy’s in place. It’s not a legal requirement, but it could give your dependents financial stability when you die.
It’s common to decide you need life insurance after a big life moment. Things like getting married, buying a house with a mortgage, or starting a family.
It can cover any outstanding financial commitments you have - like your mortgage or loan repayments - so your family won’t be left with payments they can’t afford after you’re gone.
You have a few choices to make before you buy a life insurance policy.
For example, do you want the insurer to pay a set balance when you die regardless of how long you’ve held the policy for? Alternatively, would you prefer the insurer to decrease the value of cover as the policy gets older in line with your outstanding debts?
The policy you pick depends very much on your circumstances.
Find out all you need to know about different types of life insurance coverage below and read more about whether you need life insurance.
Compare life insurance the easy way
We can help you find the right life insurance for you at the right price, so your family aren’t left with payments they can’t afford.
-
Getting started
Choose the amount of cover you need and the length of time you’d like to be covered for
-
A bit about you
Just a few details about you - it’ll take about 10 minutes
-
Get the cover you need
Choose the best cover option for your needs and sit back knowing your family are protected
98.3% of life insurance claims were paid out in 2019 - the highest proportion on record
According to the ABI, May 2020
Types of life insurance
There are three main types of life insurance - choose the one that meets the needs of you and your dependants.
Level term life insurance
Decreasing term life insurance
Critical illness cover
The simplest type - you decide the pay-out value and duration of the policy at the outset.
If you die within the term of the policy, your dependants will receive the pay-out as a fixed sum. The amount paid out stays the same regardless of when a claim is made.
Key points
- You need to decide the pay-out amount and duration of your policy
- The policy will only pay-out during the term you choose
- Your dependents will be paid a fixed sum
- The pay-out amount stays the same throughout your policy
Also known as mortgage life insurance, it’s designed to cover debts that decrease over time - like your mortgage.
The amount paid out by the policy reduces with time. If you were to die near the start of the policy term, your dependents would receive more than near the end, when there’s less mortgage to pay off.
This can be a cheaper life insurance option than level term. But if your circumstances change, and you increase your borrowing, you might find the amount isn’t enough.
Key points
- The amount the policy pays out decreases over time
- The policy will only pay-out during the term you choose
Whether you take out critical illness cover with life insurance or on its own, this type of protection can help you financially if you’re diagnosed with a serious illness during the term of your policy. It’ll help you financially if you’re unable to work, for example.
You’ll be insured for a fixed amount. It’s either paid out as a lump sum, so you can pay off any outstanding debts, or monthly payments.
Critical illness cover is usually sold alongside a life insurance policy, but you can buy it on its own if you like.
If you buy a critical illness policy alongside your life insurance through us, it’ll pay out while you’re alive if you become critically ill. If you don’t claim a pay out for a critical illness while you’re alive, it’ll pay out in the event of your death, alongside your life insurance policy.
Key points
- Can pay a monthly or fixed sum if you’re diagnosed with a critical illness
- You can choose to include critical illness cover when you're comparing life insurance quotes with us
- You can buy critical illness cover separately from specialist providers, or alongside your life insurance policy through us
How does life insurance work?
Life insurance pays out a lump sum if you die. With some policies, a payout is made if you’re diagnosed with a terminal illness too.
You decide how long you want to be covered for, how much you want paid out, and who to, when you take out a policy.
The amount paid out can change over time.
If you take out a level term or whole of life policy, the payout is fixed. With a decreasing term policy, the payout decreases over the term of your cover.
What information do I need to compare life insurance?
If you’re looking for a joint policy, you’ll need the below details for both of you
-
Health
Things like any pre-existing medical conditions you might have, and your weight and height
-
Age and occupation
Generally, the younger you are the cheaper the policy will be. How risky your job is also plays a part
-
Lifestyle
Whether you smoke, drink or exercise
The cost of life insurance
The cost of your life insurance policy depends on quite a few things. But it’s possible to find cover from £5/month, depending on your circumstances and the type of policy you choose.[2]
How old you are, if you’re generally in good health or not, your lifestyle, and whether you smoke and/or drink all play a part. It’ll also depend on how much cover you need, and whether you choose a level term or decreasing policy.
Decreasing term life insurance (also called mortgage cover) tends to cost less than level term for example, because the pay out from the policy decreases with time.
It’s also worth comparing premiums with and without critical illness cover as this can also influence the cost of your premiums. You can either add critical illness to your life insurance cover, or buy it as a separate policy. You can't compare and buy critical illness cover through us on its own. But you can compare life insurance with critical illness cover included.
When should I get life insurance cover?
As soon as you have people who rely on your income, like a partner or children, things change. Ask yourself if they could cover the cost of the mortgage, any other debts, or everyday living without your income. If the answer is no, think about getting life insurance.
You don’t have to have a partner or children though. It can be an important part of estate planning too. Mortgage cover could be helpful if you have a family member you plan to leave your estate to, for example.
Other types of life insurance
There are a number of different types of life insurance available, but they all pay out either as level term or decreasing policies.
What’s different about these types is they’re mainly based on your personal circumstances. So, the cover changes slightly.
Over-50s life insurance
If you’re aged between 50 and 79, you can get a whole of life policy without the need for medical assessments. You’ll stop paying premiums when you reach 85 or 90. There’s usually a short qualifying period at the start of the term.
Joint life insurance for couples
If you’re in a relationship, you could take out a decreasing term policy that pays out in the event of either of you dying. It can be a cheaper option than holding two policies. But it will only pay out on the first death, after which the cover will end.
Alternatively, you can add your partner as a second applicant when you buy level-term life insurance. You’ll each have your own policy with separate cover.
Life insurance for new parents
When you’ve got a little one on the way, thinking about the future is inevitable. If you were to pass away, life insurance could cover childcare costs as well as the mortgage, so your partner won’t have to worry about paying out large sums of money.
With pre-existing medical conditions
A pre-existing medical condition can mean fewer life insurance providers to choose from. You might also have to pay a higher premium to have your condition included on your policy. Alternatively, you can choose to exclude your existing illness from your cover altogether. But the policy won’t pay out if you die as a result of the excluded condition.
My employer offers life insurance, won’t that cover me?
Many employers offer a form of life insurance – ‘death in service’ cover - which usually offers a pay out of three or four times your annual salary (whether your death is as a result of your employment or not). If you have it, and feel it’s sufficient to provide for your family, then you might feel like you don’t need life insurance as well.
Bear in mind, when you leave your employment, this cover ceases - and there’s no guarantee your future employers will offer it as part of your package.
How much life insurance do I need and for how long?
Deciding how much life insurance you need and how long to make the policy last for can be a difficult decision.
Generally, the advice is to take a policy worth 10 times the highest earner’s annual salary. But the higher the amount you’re insured for, the higher your premiums.
We’ve put together some pointers to help. When you get a quote with us there’s a calculator to help you work all this out.
-
What do you need cover for?
It’ll help work out how long you need cover for too. If it’s for your mortgage, take out life insurance to cover your remaining mortgage term. If it’s to see your children through their education, make sure it covers you until your youngest finishes their education.
-
What type of cover do you want?
You’ll have to decide whether to take out level or decreasing term cover and whether you want critical illness included or not. The more extensive your cover, the more it'll cost.
-
Make sure you’ve covered everything you need to
It doesn’t just have to be about your mortgage, you can factor in other debts and monthly outgoings too. Things like personal loans and credit cards. Consider future costs as well. If you have children, would they need help through university? And funeral costs can be a big expense at a difficult time.
-
Consider Inflation
The amount you choose might be worth less in real terms in a few decades’ time because of inflation.
When should I review my life insurance policy?
It’s a good idea to review your life insurance yearly. Your circumstances could’ve changed, and your life insurance might not meet your needs anymore.
It’s rarely a good idea to cancel an existing life insurance policy. But you should consider amending your policy or taking out a second policy if your circumstances have changed.
Times when you might need to amend or take out more cover include:
- Changes to health or lifestyle
- Divorce or separation
- New job or redundancy
- More debt, or an increased mortgage
- Changes to beneficiaries
Frequently asked questions
-
What are the typical life insurance exclusions?
If you die because of the following, you typically won’t be covered:
- Suicide or self-harm
- Pre-existing medical conditions (if you hadn’t declared them)
- Dangerous activities
- Drug or alcohol abuse
If you don’t keep up with payments, your cover will usually be cancelled too.
-
Can I hold multiple life insurance policies?
It’s possible to hold multiple life insurance policies and in some cases this might be worth considering. If, for example, you have an existing policy but need more cover, the most cost-effective way might be taking out an additional policy.
-
What’s mortgage life insurance?
It’s no different to a standard life insurance policy, it’s just tailored specifically to clear any remaining mortgage debt after the policyholder's death. It’s usually a decreasing-term policy to reflect the reducing balance of your mortgage over time. Find out more in our guide.
-
Can you get life insurance if you have a pre-existing medical condition?
You can get life insurance with pre-existing medical conditions. But expect to pay more and have less insurers to choose from.
You need to tell insurers about any pre-existing conditions you have. If you don’t, you won’t be covered for them.
When you take out cover, you’ll be asked questions about your medical history.
You could choose to exclude the condition from your cover, which might lower your premiums. But it does mean if you die as a result of that condition, there’ll be no payout.
-
What happens to my policy if I miss payments?
Some providers will give you time to make up missed payments without your policy being affected. But this’ll be on a case by case basis.
If you miss payments, and don’t get in touch with your insurer, your policy will be cancelled. You won’t get any of the money you’ve paid back. If you’re worried you can’t keep up with payments, contact your insurer.
-
Is life insurance more expensive for smokers?
If you smoke, or use nicotine products like vapes, your life insurance will cost more. Most insurers will still risk rate you as a smoker if you’ve quit within the last 12 months too.
If you’ve already got life insurance and you’ve quit smoking for longer than 12 months, tell your insurer. They might lower your premiums.
-
Is life assurance the same as life insurance?
Technically no, but the two terms are often used to mean the same thing. Strictly speaking, life insurance pays out if something happens to you, whereas life assurance pays out when it does. So level term cover is life insurance, whereas a whole-of-life-policy is life assurance.
-
Do I also need income protection?
This is dependent on your circumstances, but the right income protection (IP) policy can be valuable as a stand-alone product or as an addition to life insurance/critical illness cover. Life insurance won’t cover you if you cannot work due to illness or disability. Some IP policies include an element of death cover.
-
What’s waiver of premium?
It’s simply a way of insuring your monthly payments so they’ll still be paid if you’re unable to work due to ill health. Payments are made either until the end of the policy term, until you’ve reached a specific age, or until you’re able to return to work.
-
Will my life insurance pay out if I’m terminally ill?
Some policies include cover for terminal illness. They’ll pay out while you’re still alive if you receive a terminal diagnosis and are expected to die within 12 months.
-
Are life insurance pay outs taxed?
Life insurance payouts aren’t usually liable to income tax or capital gains tax. But your estate could have to pay inheritance tax (IHT) on a payout from your policy. Writing your life insurance policy in trust should mean your estate doesn’t have to pay IHT. Plus, by writing your policy in trust your beneficiaries could get the payout quicker. Tax rules can change though, and they depend on your personal circumstances. It might be worth getting financial advice, so you can plan better for your requirements.
-
What’s clawback?
If a policyholder cancels within a certain period of time then the adviser or broker who sold the policy would have to repay a proportion of their commission back to the provider.
It can help protect you from being mis-sold a policy by a broker. The broker will want you to have an appropriate policy that you’re happy with so you’re less likely to cancel it.
-
What financial help can I get if my partner dies?
You may be eligible to claim bereavement support payment to care for you and your children if your partner or spouse dies. Bereavement benefits changed substantially from 6 April, 2017, so check what you can claim.
Guides to life insurance
[1]For comparing quotes online, Gocompare.com introduces customers to Neilson. Which is a trading name of Neilson Financial Services Limited who are authorised and regulated by the Financial Conduct Authority no. 594926. Gocompare.com's relationship with Neilson Financial Services Limited is limited to that of a business partnership, no common ownership or control exist between us.
[2]Your cover will depend on your individual needs, circumstances and the premium you choose to pay
Page last reviewed: 16 November 2020
Next review due: 18 January 2021