Life
Life insurance explained
What life insurance is, how term and whole of life cover differ, what affects the cost and why people with financial dependants often consider it.
Life insurance gives financial protection to the people who depend on you if you die. It pays a lump sum or regular payments to your beneficiaries, which can help with costs such as funeral expenses, outstanding debts like a mortgage, and everyday living costs.
The two main types of life insurance
1. Term insurance
Term insurance covers you for a set period, chosen when you take out the policy. If you die during the term, your beneficiaries receive a payout. If you outlive the term, the policy ends and nothing is paid.
Term policies come in different forms. With level term cover, the amount paid out stays the same throughout. With decreasing term cover, the amount reduces over time, which is often used alongside a repayment mortgage.
2. Whole of life insurance
Whole of life insurance covers you for the rest of your life, as long as you keep paying the premiums. Because it will pay out at some point, it usually costs more than term cover for the same amount.
What affects the cost
The cost of life insurance depends on several factors, including:
- your age
- your health and medical history
- lifestyle factors such as whether you smoke
- the amount of cover and, for term insurance, the length of the term
Generally, younger and healthier people pay lower premiums than older people or those with health conditions. It is important to answer the insurer's health and lifestyle questions honestly, as getting them wrong could affect a claim.
It is worth looking at the options available and comparing policies to find cover that suits your needs at a price you are comfortable with.
Who considers life insurance
Life insurance is often considered by people whose partners, children or other relatives depend on them financially, or who have a mortgage or other debts they would not want to leave behind. It can give peace of mind that loved ones would have some financial support. For free, impartial information on life cover, see MoneyHelper.
At Kompare, you fill in a short form, and a specialist FCA-authorised broker from our panel contacts you to talk through life insurance quotes. Find out more on our life insurance page.