Life insurance is something most people know they should have — but few truly understand. If anyone depends on your income, having the right cover in place is one of the most important financial decisions you can make. This guide cuts through the jargon and explains exactly what you need to know.
A Simple Question: What Would Happen Financially?
If you died tomorrow, could your family:
- Continue paying the mortgage?
- Cover monthly bills and living costs?
- Afford childcare or school fees?
- Maintain their current lifestyle — even short-term?
If the answer to any of these is "no" or "I'm not sure," you need life insurance. It's not about fear — it's about practical financial planning.
Types of Life Insurance
Level Term Life Insurance
Pays out a fixed lump sum if you die within the policy term (e.g., 20 or 25 years). The payout amount stays the same throughout. Best for replacing your income or covering a specific financial need.
Example: A £300,000 level term policy for 25 years pays £300,000 whether you die in year 1 or year 24.
Decreasing Term Life Insurance
The payout amount reduces over time, designed to match a repayment mortgage balance as it decreases. Significantly cheaper than level term because the potential payout reduces each year.
Best for: Covering your mortgage specifically. If the mortgage is repaid and you pass away, the cover is no longer needed anyway.
Family Income Benefit
Instead of a lump sum, this pays a regular monthly income to your family for the remainder of the policy term. This mirrors a salary and can be easier for families to manage than investing a large lump sum.
Example: A policy paying £2,500/month for a 20-year term would pay your family £2,500/month from the date of your death until the policy expires. Learn more about Family Income Benefit.
Whole of Life Insurance
Covers you for your entire life (no fixed term). Guaranteed to pay out, which makes it more expensive. Often used for inheritance tax planning or to leave a guaranteed legacy.
How Much Cover Do You Need?
There's no one-size-fits-all answer, but here's a framework:
For Mortgage Protection
A decreasing term policy to match your mortgage balance. This ensures the mortgage is fully repaid if you die.
For Income Replacement
The general recommendation is 10-15 times your annual salary. This provides enough to replace your income for several years, allowing your family time to adjust.
For a person earning £40,000/year, that's £400,000-£600,000 of cover.
Our Recommended Approach
We often recommend a combination:
- Decreasing term to match the mortgage (cheapest option to cover the home)
- Plus level term or Family Income Benefit to cover living costs, childcare, and future expenses
This layered approach provides comprehensive protection at a manageable cost.
What Does It Actually Cost?
Life insurance is almost always cheaper than people expect. Here are some realistic examples for healthy non-smokers:
- Age 30, £200,000 decreasing term over 25 years: From £5-£8/month
- Age 35, £300,000 level term over 20 years: From £12-£18/month
- Age 40, £250,000 level term over 15 years: From £15-£25/month
Premiums increase with age, so the sooner you arrange cover, the cheaper it will be. Most policies are fixed — meaning your premium never increases once the policy starts.
Writing Your Policy in Trust
This is one of the most important (and most overlooked) aspects of life insurance. Writing your policy in trust means:
- The payout goes directly to your named beneficiaries — bypassing your estate
- No waiting for probate (which can take 6-12 months)
- The payout is not subject to inheritance tax
- Your family can receive the money within days, not months
Setting up a trust is free and takes minutes. We arrange this as standard for every client — it's one of the most valuable things we do.
Pre-Existing Medical Conditions
Having a health condition doesn't mean you can't get life insurance. Many people with conditions like diabetes, high blood pressure, depression, or even a history of cancer can get cover. Premiums may be higher, and some exclusions may apply, but specialist insurers exist for almost every situation.
We know which insurers are most favourable for specific conditions and can present your application to achieve the best possible terms. Explore our life insurance services.
Critical Illness Cover: Worth Adding?
Critical illness cover pays a lump sum if you're diagnosed with a specified serious illness (cancer, heart attack, stroke, etc.). It can be added to a life insurance policy or taken as a standalone product.
Statistics show you're more likely to be diagnosed with a critical illness during your working life than to die. Adding this cover to your life insurance policy provides an extra layer of protection — paying out while you're alive and can use the money for treatment, recovery, or simply clearing your mortgage so you can focus on getting better. Learn more about Critical Illness Cover.
Do You Need Life Insurance If You're Single?
If nobody depends on your income, life insurance is less urgent. However, consider:
- Do you have a mortgage that would need to be repaid from your estate?
- Would any debts fall to a co-signer or guarantor?
- Getting cover while you're young and healthy locks in the cheapest rates for the future
Get a Free Life Insurance Review
We'll assess your needs, compare the market, and find you the right cover at the best price. No obligation, no hard sell.