When looking for the best Life Insurance in the UK, there actually isn’t a single provider that’s “better than the rest”. But there will be a provider that’s best for your individual needs. There are a number of factors you can look at to help you judge the quality of a Life Insurance policy. These include:
- How clearly the policy is worded
- The amount and type of things that are excluded from your cover
- If the premiums are guaranteed to stay the same, or if they’ll go up
- If there are any optional extra areas of cover
- The amount of Life Insurance claims that are actually paid.
And most importantly: you need to think about value for money. Just because a Life Insurance policy is the cheapest, doesn’t make it the best. You’re looking for the right policy at the right price.
If you’re feeling overwhelmed, we’re here to explain all in this guide. Rather speak to one of our friendly experts? Give us a call on 02084327333, or email help@drewberry.co.uk.
What Is Life Insurance & What Does It Cover?
Life Insurance pays a lump sum of money to your loved ones or a nominated beneficiary 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.
The money received can be used for any reason, although many of our clients use it to:
- Provide financial security to their loved ones after they’re gone
- Repay a mortgage or other debts
- Cover funeral expenses — the average funeral now costs more than £4,000
- Protect against a large inheritance tax bill (a gift inter vivos policy).
What Is Not Covered By Life Insurance?
Even the best Life Insurance companies won’t pay out in certain situations. These include if the death is:
- Self-inflicted
- Caused by misuse of drugs or alcohol
- Due to involvement in terrorist activity or war
- Caused by reckless activity or gross negligence.
Do I Need Life Insurance?
Life Insurance can give you and your family a safety net in case something happens to you. Here are some situations where it might be a good idea to consider getting insured:
If You Have Kids
It’s worth considering Life Insurance to make sure your family is taken care of if you’re not around. You might want it to cover school fees for younger kids or university costs for older ones. You can choose coverage that lasts until your child is an adult, usually 18, but this can be extended.
It’s why self-employed mummy blogger Mrs Mummypenny chose to take out Life Insurance. It provides her with financial security and peace of mind that her family would be looked after should the worst happen.
If You’re Buying A House
You don’t have to have Life Insurance to get a mortgage, but it can be a good idea to have a safety net in place. Ask yourself: could your partner continue to pay the mortgage without you here? With Life Insurance in place, they could pay off the mortgage should the worst happen – think of it like a gift from the beyond.
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If you’re buying life insurance to cover a mortgage, it’s best to opt for a decreasing term. This is because the payout decreases over time as you chip away at your mortgage. As a result premiums are cheaper.
If You’re Married/Civil Partnership Or Moving In Together
Think about how your partner would manage financially without you. You can choose a fixed payout insurance (level term) or one that increases over time to keep up with the cost of living (increasing term).
If both you and your partner want insurance, getting two separate policies might be smarter than one joint Life Insurance policy. With separate policies, if something happens to both of you, there would be two payouts instead of just one with a joint policy.
To Handle Inheritance Tax
If you’re worried about a big inheritance tax bill on your estate, you can set up a life insurance policy in a trust to cover this tax. This way, your family gets to keep your whole estate without having to sell assets to pay off the tax bill. Read more about writing Life Insurance into trust.
Which Life Insurance Is Best For Me?
Before thinking in any detail about Life Insurance, you need to work out which type of Life Insurance policy you actually need. This depends on what you’re looking to protect, as well as on the needs of you and your family.
These are the main types of Life Insurance:
Term Life Insurance
The most common type of life insurance is known as term life insurance, where you choose a specific period (the term) during which the policy provides coverage. There are three primary kinds of term Life Insurance:
Decreasing Term Life Insurance
Decreasing Term Life Insurance is where the lump sum payout decreases over time, reaching zero at its end. It’s a good option for covering repayment mortgages, where the amount you owe decreases over 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.
Increasing Term Life Insurance
Increasing term insurance is where the amount paid out upon death increases over time, either by a set percentage or in line with inflation measures like the Retail Prices Index (RPI) or the Consumer Price Index (CPI). This costs more due to the rising potential payout.
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 Life Insurance policy length. It lasts until your death and pays out whenever this might be providing you keep paying premiums.
Over 50s Life Insurance
As it says on the tin, this type of Life Insurance is specifically designed for seniors. Life Insurance gets more expensive as you get older, but it can still be a worthwhile investment, especially since many people are buying homes and having kids later in life.
The Best Life Insurance Policy Add-Ons
Many providers will offer additional benefits as well as the core cover. These may be included as standard or offered for an additional premium.
Critical Illness Cover Included
Most Life Insurance policies will offer Critical Illness Insurance as an add-on. If you choose this cover, it’ll increase the price of your premium. However, it can often be a more cost-effective choice compared to taking out separate Life Insurance and Critical Illness Cover policies.
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). This means you have some financial support for you and your loved ones during a difficult time.
Guaranteed Premiums
Guaranteed Life Insurance premiums – where the monthly sum you pay doesn’t change through the life of the policy – are generally seen as “better” than reviewable Life Insurance premiums. This is because the insurer can’t change the amount they charge you. While reviewable premiums may be cheaper at the outset, they can become significantly more expensive in the long term as insurers are free to raise premiums over time.
Waiver of Premium
Paying a bit more for a waiver of premium means that you can pause your payments while still keeping the Life Insurance policy in place. 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 are designed to help you cope with changing, unpredictable circumstances. Just remember; 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 Free Additional Benefits
At their core, all Life Insurance policies pay out money if you pass away. It’s not the most enjoyable thing to spend money on, so insurers differentiate themselves by offering additional benefits as part of your policy.
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.
How To Get The Best Premiums?
There is no one size fits all when it comes to getting the best premiums. The cost of Life Insurance will very much depend on a number of personal and policy factors.
For example, if you’re older, have any health conditions, or smoke you can expect to pay more. And combining Critical Illness Cover with Life Insurance will also raise the price.
To give you an idea of how much Life Insurance might cost, we’ve provided examples below. These take into account various different policy and personal factors and are based on the following:
- A healthy non-smoker
- Employed in a desk-based role
- Seeking £250,000 of Life Insurance to age 65
- Wants Level Cover
- Applying for cover as a single individual, not jointly with a partner.
Policy Factors
Below, we’ll take a look at the specific decisions you’ll make to your policy that affects the price of your insurance.
Sum Assured
This is how much you want the policy to pay out if you pass away. The larger your sum assured, the higher your Life Insurance premiums will be each month.
Policy Length
How long you want the policy to last. The longer you need Life Insurance, the higher your premiums will be (due to the greater risk of you dying as you get older.
Type of cover
Level term Life Insurance cover is more expensive than decreasing term Life Insurance as the benefit is fixed for the policy term. Meanwhile, premiums for increasing cover will rise alongside your benefit.
Personal Factors
As well as policy factors, there are some personal factors which will also impact the price you pay for Life Insurance. These include:
Age
Unfortunately, the older we get, the more likely we are to pass away. Because of this, your age plays a big part in how much you will pay for a policy.
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.
Smoker Status
Due to the health risks associated with smoking, smokers can often pay more for cover. This is because they 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.
Our expert in-depth review of each of the UK's leading providers
Who Are The UK’s Best Life Insurance Companies In 2024?
We’re independent insurance brokers, so we work with all the top UK Life Insurance companies to find you the absolute best cover for your needs.
It’s always best to get advice from an expert before taking out a policy, but to illustrate the potential options, here are the top 10 UK Life Insurance providers, what they offer, and our expert verdict on each of them.
Do Life Insurance Providers Actually Pay Out?
There’s often a stigma around insurers that they’ll do anything to get out of paying. But the evidence shows quite the opposite.
The Association of British Insurers found that UK Life Insurance providers paid out a total of £4.64 billion to claimants in 2022, with the average payout increasing for the third year in a row, from £14,931 to £15,448 (an increase of 9%!).
To see how different insurers pay out, take a look at our guide: Life Insurance Claim Payout Rates By Insurer.
In most cases where an insurer does pay out, it’s because the policyholder didn’t disclose important information when taking out Life Insurance. So it’s crucial to be as open and honest as possible about your existing health conditions or hazardous hobbies.
It can be overwhelming knowing where to start, so give us a call on 02084327333 or email help@drewberry.co.uk to chat to one of our friendly advisers. We love insurance, so you don’t have to.
EXPERT TIP 🤓
You shouldn’t use payout statistics alone to decide which insurer offers the best critical illness cover. Instead, use them as a rough guide to compare successful claims across the industry as a whole.
Do I Need Life Insurance For A Mortgage?
No, you don’t need Life Insurance to get a mortgage. It’s not a legal or regulatory requirement. However, it’s worth considering 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?
Mortgage 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 To Life Insurance?
Whether you need to add Critical Illness Cover to your Life Insurance policy depends on your circumstances. Firstly, it’s worth noting that a critical illness would likely cause financial difficulties. If you were to be diagnosed with a critical illness, would it cause financial difficulties? If so, it might be a good idea to cover your mortgage or other expenses with this type of insurance. It pays to be prepared.
Should I Write My Life Insurance Into Trust?
Writing your Life Insurance into trust means the insurer pays your benefit into a trust first, and then passes it to your family. As a result, the payout never becomes part of your estate and is therefore more efficient when it comes to inheritance tax.
While this is available with every insurer, the best Life Insurance providers let you do this 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. Give us a call on 02084327333 or email help@drewberry.co.uk for free advice.
Compare Best Life Insurance Quotes & Get Expert Advice
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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.
