There are lots of factors to consider when looking at the best Life Insurance providers in the UK.
There is not necessarily one leading provider however there may be one which is more appropriate for you given your personal circumstances.
There are a number of factors you can look at to help you judge the quality of a Life Insurance policy. These include:
- Clarity of policy wording
- The number and range of exclusions
- If premiums are guaranteed
- Optional extra areas of cover
- Percentage of claims paid.
You also need to think about value for money, as simply paying the most expensive premium won’t necessarily guarantee you the best life cover. You’re looking for the right policy at the right price.
In addition to this expert guide we have also written expert product reviews for each of the top UK life insurance providers individually including Aviva, Legal & General, LV and Vitality.
What Does Life Insurance Cover?
Life Insurance pays out a lump sum if you pass away during the policy term. You’ll also get a payout if you become terminally ill, where a doctor says you have less than 12 months to live.
You can use your payout however you see fit, although many of our clients use the benefit to:
Which Life Insurance Is Best For Me?
Before thinking in any detail about Life Insurance, you need to work out which type of policy you actually need. This depends on what you’re looking to protect, as well as on the needs of you and your family.
There are four main types of Life Insurance:
Decreasing Term Life Insurance
Decreasing Term Life Insurance sees the payout fall over the policy term, reaching zero at its end. This makes it well-suited to covering repayment mortgages, where the amount you owe declines with time as you make capital and interest repayments.
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Level Term Life Insurance
With Level Term Life Insurance, the payout is the same in the first year as in the last. It’s therefore generally better for covering interest-only mortgages. With such mortgages, you only make interest payments so the capital balance you owe doesn’t fall over time.
It’s also useful to provide a consistent level of financial protection for your loved ones.
Family Income Benefit
Family Income Benefit provides a regular income to your dependents rather than one lump sum. This offers a more manageable benefit to replace lost income so your loved ones can maintain their lifestyle should you pass away.
Whole of Life Insurance
Whole of Life Assurance might be the right option if your loved ones will definitely need a lump sum after you’ve gone, possibly to pay funeral costs or meet an inheritance tax bill.
This is because there’s no set term. The policy lasts until your death and pays out whenever this might be providing you keep paying premiums.
Why Is Life Insurance Important?
Before asking the question which is the best Life Insurance it is important to make sure it is appropriate. Life Insurance is really only valuable if you would be leaving loved ones or an outstanding debt behind.
For many of us there are families who would be left in financial difficulty or mortgages that need repaying. That’s where Life Insurance can step in to provide invaluable financial support should the worst happen.
What are the chances of dying…
Unfortunately death is a risk we often shy away from thinking about, underestimating the chances of it happening and the impact it would have on those around us.
- The Drewberry™ Health & Protection Survey found we are SIX times more likely to pass away before retirement than most people think.
- The survey also found 2 in every 5 households have no more than £1,000 in cash savings to see them through should they fall on hard times, such as after the death of a breadwinner.
Below is data taken from our Life Expectancy Calculator which is powered by ONS Data showing the likelihood of passing away at various ages.
Insurer Liverpool Victoria are very transparent with their claims data publishing the following statistics with regards to their Life Insurance policyholders.
- 63 was the average age for a female life insurance claim
- 47 for a female critical illness claim
- The youngest life cover claimant was 24 years old
- The average person had had their policy for just 9 years upon sadly passing away and leaving their family needing to claim.
What Is Not Covered By Life Insurance?
Life Insurance has few standard exclusions however most policies tend to exclude the following.
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If the death is self-inflicted
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If the death is caused by misuse of drugs or alcohol
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If the death is due to involvement in terrorist activity or war
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If the death is caused by reckless activity or gross negligence
Suicide is excluded with most insurers however it is often only excluded for a set period of time after taking out the policy – typically 12 months.
Which Life Insurance Providers Have The Best Payout Rates?
If you are going to spend your hard earned money on a Life Insurance policy you want to know if the worst did happen that it would pay out.
In 2017, the Association of British Insurers collated the industries claims statistics and published results showing 98% of term insurance claims were successful, as were 99.99% of whole of life claims.
For the small proportion of claims that weren’t paid, the ABI cites that this was largely due to clients not disclosing important information when taking out the policy, or claiming for a condition that is not covered by the policy.
Be As Accurate As Possible With Your Life Insurance Application
When setting up your policy it is important to be as open and honest as possible with regards to existing health conditions and any hazardous pursuits you may undertake. It can be really valuable speaking to an adviser to make sure you have done everything you can to submit an accurate application.
If you need any help them please do not hesitate to pop us a call on 02084327333, our team of expert advisers are here to make sure you have everything set-up correctly.
Don’t Underestimate Just How Many Claims Get Paid
Below is a summary of the published claims statistics from the top UK life insurance providers. It is reassuring to know just how high successful claims rates are as many UK adults heavily underestimate this.
Our latest survey found 44% of UK adults think less than 50% of Life Insurance claims got paid 🙈.
IMPORTANT NOTICE 🧐
You shouldn’t use payout statistics alone to decide which insurer offers the best life insurance. Instead, use them as a rough guide to compare successful claims across the industry as a whole.
Which Life Insurers Offer The Best Premiums?
There are a few factors which affect the cost of Life Insurance. They’re split into personal and policy factors.
Policy Factors
- Sum assured
How much you want the policy to pay out if you pass away. The higher your benefit, the more premiums will cost.
- Policy length
How long you want the policy to last. The longer you need Life Insurance, the higher your premiums due to the greater risk of you dying as you get older.
- Type of cover
Level cover is more expensive than decreasing cover as the benefit is fixed for the policy term. Meanwhile, premiums for increasing cover will rise alongside your benefit.
Personal Factors
- Age
The older you are when you take out the policy, the more it will cost due to the higher risk of dying the older we get.
- Health and medical history
Insurers look at your health, including factors such as your height and weight. If you have certain medical conditions, the insurer will likely charge more to compensate for the increased risk of passing away.
- Smoker status
Smokers are more likely to die prematurely than non-smokers. Insurers therefore charge them more.
- Occupation
If you work in a riskier role, such as on a construction site or at heights, you run a greater risk of death in your daily life than the typical desk worker. Higher risk roles generally therefore mean higher premiums.
Example Premiums
To come up with the premiums in the table below, we’ve had to make a number of assumptions about each individual. For example, we’ve assumed they are:
- A healthy non-smoker
- Employed in a desk-based role (an accountant)
- Seeking £250,000 of Life Insurance to age 65
- Applying for cover as a single individual, not jointly with a partner.
If at any point you are ready to find out what life insurance will cost given your own circumstances you can use our online quote tool which compares premiums from all the top UK life insurance companies insurers →
The Top Additional Life Insurance Options
Many of the best Life Insurance policies will have additional benefits above and beyond offering a payout on the policyholder’s death. These may be included as standard or offered for an additional premium.
Including Critical Illness Cover
Most Life Insurance policies will offer Critical Illness Insurance as an add-on. If you choose this cover, it will increase the price of your premium; however, this is likely to be a better choice in terms of price than taking out Life Insurance plus a separate critical illness cover (CIC) policy.
Terminal Illness Cover
Terminal illness cover is usually a standard feature of Life Insurance policies, allowing for a payout to be made before the policyholder’s death if they’re diagnosed with a terminal condition (having less than 12 months to live).
Type Of Premiums
Generally, guaranteed Life Insurance premiums – where the monthly sum you pay doesn’t change through the life of the policy – are seen as ‘better’ than reviewable Life Insurance premiums.
This is because the insurer can’t change the amount they charge you
Reviewable premiums may be cheaper at the outset of the policy, but could prove significantly more expensive in the longer term as insurers are free to raise premiums over time.
This may happen if, for example, the provider experiences higher claim levels than it had anticipated, or if a major change in interest rates increases its cost base.
Waiver of Premium
This option can mean that, if you find yourself in unfortunate circumstances, your Life Insurance policy remains in place without you having to continue to make premium payments; this may be, for example, if you can’t work because you’ve become seriously ill.
Flexible Lifestyle Options
Policies can come with an enormous range of flexible options that can seem great to cope with changing, unpredictable circumstances. But you also need to remember that the more flexibility you build into a product, the more you’re likely to pay in premiums.
Some common options include:
- Guaranteed insurability
Allows you to increase your level of cover without a further medical assessment
- Benefit indexation
The level of your potential payout will increase in line with inflation
- Renewable Term Life Insurance
Gives the option to renew at the end of the policy without a further medical assessment
- Convertible Term Life Insurance
Can be turned into a whole of life policy without a further medical assessment
Best Support Services
Look beyond the core cover. All policies at their core pay out if you pass away. A key way the best Life Insurance providers differentiate themselves is in the additional benefits they offer.
These benefits commonly include:
- Digital GP services
- An advance from your benefit towards your funeral / probate fees if your benefit is tied up in probate
- Mental health support
- Support with bereavement for your family after a claim
- Access to estate planning / will writing / power of attorney services.
Is It Best To Write Life Insurance Into Trust?
Writing your Life Insurance into trust means the insurer pays your benefit into a trust first. The trust then passes it to your family. As a result, the payout never becomes part of your estate and therefore avoids inheritance tax.
While this is available with every insurer, the best Life Insurance providers let you do it easily online. This is opposed to the traditional way with wet signatures and paper forms going back and forth to trustees and the insurer.
If your insurer offers online trusts, your adviser can set up your trust with you when you apply. It’s a much smoother process that’s easier for everyone.
Who Are The UK’s Best Life Insurance Companies In 2023?
Being independent insurance brokers we work with all the top UK insurers when finding our clients the best cover.
There are more than 10 major UK Life Insurance providers to compare. Despite the high number of insurers, it’s important to compare all of them when you’re considering your options.
To help you navigate the many potential pitfalls we have put together the table below summarising each of the major insurers products and our verdict on each of them.
Our expert in-depth review of each of the UK's leading providers
Do You Need Life Insurance For A Mortgage?
No, you don’t need Mortgage Life Insurance to get a mortgage. It’s not a legal or regulatory requirement.
However, you need to consider what would happen to that mortgage if you were to pass away before repaying the debt.
Could your family take on the debt and meet the mortgage repayments if they wanted to continue living in the property? If not, would they have to uproot themselves and downsize to something more affordable?
Life Insurance will repay the mortgage should you pass away, meaning your loved ones don’t have to worry about how to afford housing costs after you’re gone.
Should I Add Critical Illness Cover?
Whether you need Critical Illness Insurance depends on your circumstances.
Firstly, it’s worth noting that a critical illness would likely cause financial difficulties. It might therefore be a good idea to cover your mortgage or other expenses just in case. It pays to be prepared.
What Does It Cover?
Critical Illness Insurance pays out if you develop a critical illness listed in the plan. You must meet the severity of that illness in the policy to claim.
The most common Critical Illness Insurance payouts are for cancer, heart attacks and strokes. However, most insurers cover a range of conditions — around 40 is typical.
Yet as you must meet the definition of an illness to claim, and it only covers critical conditions, it may not be the best sickness insurance.
Income Protection could be better — read more on the difference between Critical Illness Cover and Income Protection here →
Should I Add Critical Illness Cover to My Life Insurance?
Adding Critical Illness Cover to Life Insurance increases premiums. This is because the risk of critical illness is much higher than of death.
Also consider that with combined Life Insurance and Critical Illness Cover, the insurer pays out on the first instance of death or critical illness. If you develop a critical illness, the insurer pays out but the policy ends.
That means you’re left without life cover at a time when it will likely be difficult to buy a new policy due to your recent critical diagnosis.
Should My Life Insurance Be Held In Trust?
Writing Life Insurance policies into trust sounds complicated, but it’s something that we handle every day here at Drewberry and we’re more than happy to help with the process.
Essentially, putting Life Insurance into trust means that you’re ring-fencing the benefit outside of your estate so that should a claim arise the payout goes into the trust rather than to you.
This can help avoid probate and ensure the benefit is paid swiftly whilst removing the worry of inheritance tax on the payout ensuring your family gets the full benefit you were intending.
Compare Best Life Insurance Quotes & Get Expert Advice
We exist to help you find the best life insurance for your circumstances and do so at the most competitive premiums. We are completely independent so can provide you with all the advice you need to make an informed decision.
Why Speak to Us?
We started Drewberry™ because we were tired of being treated like a number.
We all deserve a first class service when it comes to issues as important as protecting our health and our finances. Below are just a few reasons why it makes sense to talk to us.
