Life insurance basics
Life insurance is one of those products that’s easy to either ignore completely or over-buy. The truth sits in between: for some people it’s one of the most important things they’ll ever arrange, and for others it’s money they don’t need to spend. Here’s how to tell which you are, and how to buy it well if you do need it.
This is information, not financial advice. Life insurance is a long-term product; for a recommendation suited to your circumstances, consider a regulated protection adviser — many charge no fee, as they’re paid by the insurer.
Do you actually need it?
Life insurance exists to protect the people who depend on your income. Ask one question: if you died tomorrow, would someone be left financially worse off?
- You probably need it if: you have children, a partner who relies on your income, or a mortgage or other debt that someone would be left to cover.
- You probably don’t if: you’re single with no dependents and no debts that would pass to others — there’s no one to protect, so there’s little point paying for cover.
Buying life insurance “just in case” when nobody depends on you is usually money better saved or invested elsewhere.
Term vs whole-of-life
There are two broad types, and most people only need the cheaper one:
- Term insurance pays out only if you die within a set period (the “term”) — say 25 years. If you outlive it, it simply ends and pays nothing. Because it won’t necessarily pay out, it’s much cheaper. It comes in a few flavours:
- Level term — the payout stays the same throughout (good for replacing income).
- Decreasing term — the payout falls over time, designed to track a repayment mortgage (often the cheapest).
- Increasing term — the payout rises to keep pace with inflation.
- Whole-of-life pays out whenever you die, so it’s guaranteed to pay — and is therefore far more expensive. It’s mainly used for specific estate-planning goals, not everyday family protection.
For the vast majority — protecting a family and a mortgage for a couple of decades — term insurance is the sensible, affordable choice.
How much, and for how long
A rough approach: enough to clear the mortgage and any debts, plus enough to replace your income for the years your dependents would need it — until the children are grown or your partner could manage alone. Pick a term that lasts at least that long. It’s a balance: more cover and a longer term cost more, so aim for “enough”, not “everything”.
Don’t forget any death-in-service benefit from your job (often three to four times salary) — it can reduce how much you need to buy privately, though remember it ends if you leave the employer.
Two things that save money and hassle
- Buy when you’re younger and healthier. Premiums are based on age and health, so cover generally gets more expensive the longer you wait.
- Be completely honest on the application. Understating your health, weight, smoking or family history to get a lower price can mean the insurer refuses to pay out when it matters most. Full disclosure is what makes the policy worth having.
The free move worth making: write it in trust
When you take out a policy, you can write it in trust — a simple, usually free arrangement that names who should receive the payout. It does two valuable things: it keeps the money outside your estate, so it isn’t counted for inheritance tax, and it lets the insurer pay your family quickly, without waiting for probate. Most insurers offer trust forms; it’s one of the easiest wins in personal finance, and often overlooked.
The bottom line
If people depend on you, life insurance is a genuine priority — and it’s cheaper than most expect. Buy term cover sized to your mortgage and your family’s needs, arrange it while you’re healthy, tell the truth on the form, and write it in trust. If you’re unsure how much or which type, a regulated protection adviser can help at little or no cost.
Last checked 1 August 2026. General information for the UK, not a personal recommendation. Insurance is regulated by the FCA.
Sources
Just so you know: this guide is information and journalism, not financial advice, and we don't recommend specific financial products. Your circumstances are your own — if you need personal advice, speak to a suitably qualified adviser. Information was correct at the "last updated" date above but things change; always check the linked primary sources.