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Protect Your Loved Ones With Life Insurance: Compare Providers in the UK

Compare and save time by finding the perfect life insurance provider with SpotDif.

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What's In This Guide

Life insurance in the UK 

Are you worried about leaving your family struggling to pay the bills? Then, life insurance could be the answer. At SpotDif, we'll help you compare the best life insurance quotes in your area. 

 

Life insurance helps you ensure your loved ones are looked after when you die. You can decide whether the money is spent on a mortgage or provides an inheritance. Or you can take out single or joint life insurance, so the money goes to your partner or your estate. 

 

Talking about death with your loved ones is never easy. But leaving them a lump sum gives you peace of mind. 

 

You need life insurance if: 

 

  • You have a partner who may struggle to cope financially alone. 
  • You have children that you’d like to give a helping hand. 
  • You want to pass on your estate intact to any living relatives. 
  • You’ve taken out a mortgage.

Whole vs. Term Insurance

Different life insurance policies fall under whole-of-life and term insurance.  

 

Whole life insurance does exactly what it says - it covers your life duration with monthly fixed premiums. This type of policy is suitable if: 

 

  • You have a lifetime mortgage. 

  • You want to cover the costs of your funeral.  

  • You write it into a trust, so it’s exempt from inheritance tax. 

 

Term insurance is temporary, providing cover for a specific period, like 10 or 20 years. If you die within the term, the policy pays out. However, if you die outside it, you won't receive a payment, and your premiums aren't refunded. If the policy runs out, you'll need to take out another term if you want to remain covered. There are three types of policy: 

 

  • Decreasing term is usually linked to a mortgage, so if you die, the payout should match what's left on your debt. 

  • Level term pays out a fixed amount. 

  • Increasing term is linked to the RPI, CPI, or fixed term percentage increase. 

How much does life insurance cost?

So, how much does life insurance cost? That depends on several factors, including: 

 

  • Age 

  • Health and family health history 

  • Lifestyle  

  • Health 

  • Policy length 

  • Occupation 

  • Amount of cover required to pay off debts like a mortgage 

 

Another factor to consider is whether you want single or joint cover. If you take out a joint policy, it only pays out once. You may prefer to each have a policy that will continue after your partner dies. 

 

The best way to get the cover you need is to compare life insurance quotes with SpotDif. We'll ask a few simple questions to find the best life insurance quotes in your area. So whether you want to pay off your mortgage or leave your kids an inheritance, you can compare cover to find the best balance of cost and benefits. 

What are the different types of life insurance? 

When buying a policy, getting a product that meets your needs is essential. The first step is to understand the main policy types: 

 

Term life insurance 

 

This insurance lasts for a specific amount of time. You’ll pay regular premiums, and the policy pays out if you die within the stated term, e.g. 10 or 25 years. 

 

Level term cover has fixed payments and a fixed payout. This lump sum could be used to make mortgage payments, pay bills or help with the cost of living. 

 

Decreasing term cover decreases over time, in line with repayments on a long-term loan. The idea is that any lump sum will be equal to your mortgage or other large debt by the time a claim is made. This type of policy is usually cheaper because the final payout gets smaller over time. 

 

Increasing term cover gives you the option to protect the final lump sum from the effects of inflation. Therefore, the policy is index-linked to inflation, and premiums will rise as the sum insured rises. 

 

Pros and cons: 

 

  • A more affordable and flexible way to protect a lump sum payout. 

  • When the term finishes, so does your cover. 

 

Whole life insurance 

 

Whole life insurance is more expensive than term insurance. However, the cover is for life, and you can fix your premiums.  

 

This type of insurance has no time limit, and payment is made when you die. 

 

Pros and cons: 

 

  • Peace of mind knowing a lump sum will be paid when you die. 

  • Term life insurance is more affordable. 

 

Joint life insurance 

 

Most joint insurance policies are first death. As a result, they'll pay out to the surviving partner and then finish.  

 

Joint policies are useful for couples looking to support each other financially. Business partners can also use them so their business continues after death. 

 

Second-death policies pay out only when both partners are dead. In this case, they can be used as a tool for inheritance tax planning. 

 

Pros and cons 

 

  • Cheaper and easier to manage with one application and a single monthly payment. 

  • If the relationship ends, separating the policies can be complicated and costly. 

 

Over 50s life insurance 

 

As the name suggests, this insurance is for anyone 50+. You choose the premiums, and a guaranteed payout is made on death. This lump sum is often used to cover the cost of your funeral. 

 

Pros and cons 
 
  • You won’t need a medical. 

  • Can work out more expensive than the payout if you live a long and active life. You may get cheaper premiums by investing in a standard policy. 

What is the best type of life insurance? 

There are several things worth considering when you take out life insurance. The best policy depends on your finances and family commitments. You'll need to consider the type of lump sum you want to leave and what it covers. If you're unsure about making a decision, talk to a life insurance broker. 

 

Whole Life Insurance vs Term Insurance 
  • Whole life insurance is significantly more expensive but builds cash value and guarantees a payout when you die. 

  • Term insurance is an affordable way to cover a financial commitment. But you will only receive a cash payout if you die during the length of the term. 

 

If you’re older and in poor health, over 50s life insurance may be an option. Cover amounts are lower. However, leaving a lump sum to cover funeral expenses can give you peace of mind. 

What age should you get life insurance? 

You must be 18 or over to get life insurance in the UK. But do you need life insurance if you’re young and healthy? 

 

You may not need to take out life insurance. But a policy gives you peace of mind if you have a family or financial dependents.  

 

If you’re buying your first home, you’ll need life insurance with your mortgage. Then, your debts will be paid if you die unexpectedly. 

 

Life insurance might not seem a priority if you're single and don't have a family or a mortgage. But if you aim to be a homeowner or start a family, life insurance can give you financial peace of mind for the future.  

 

Taking out term or whole life insurance before you’re 30 could: 

 

  • Save you money with cheaper premiums. 

  • Help you plan financially for the future. 

 

If you're a smoker, you must declare it when you take out the policy. Your insurance won't pay out if you later die from a smoking-related illness. You'll need to be smoke-free for 12 months before you can say you're a non-smoker - an excellent excuse to give up! 

Is it worth it to have life insurance? 

Life insurance isn't a legal requirement. But it could be worth it if your family would struggle without your income. A lump sum could help you meet other financial obligations even if you're single with no kids. It's also worth considering critical illness cover. You'll get a lump sum payout for a critical diagnosis to help with living costs. 

 

So, when should you consider life insurance? 

 

  • If you have financial dependents like elderly parents or a disabled child who would find life a struggle without your income. 

  • When you start a family and want to provide for them, if you die unexpectedly. 

  • When you take out a mortgage - decreasing term insurance is designed specifically to cover your debt if the worst happens. 

  • In your 20s, when life insurance in the UK is most affordable. 

 

Life insurance probably isn’t worth it if: 

 

  • Your employer offers a death-in-service benefit that pays out if you die while employed. 

  • Your partner or family aren’t financially reliant on you. 

  • You’re a low earner, and your family may lose means-tested benefits. 

 

If life insurance is right for you, we’ll help you find the best whole life insurance or term life insurance quotes. 

What happens if you outlive your life insurance?

Term life insurance covers you for a period of time. Once that agreed set period is over, your cover expires. You won’t receive a payout of any kind. 

 

If your term life insurance is ending, you’ll have four options: 

 

  • Renew your policy for another term. 

  • Take out a new policy. 

  • Convert to whole life insurance. 

  • End your life insurance cover. 

 

Each has pros and cons depending on age, health and financial situation. Talking to a life insurance broker could help you make the right choice. 

Can you cash in life insurance in the UK? 

If you hold a term life insurance policy, you won’t be able to cash it in. If you want to build cash value, you’ll need to take out whole life insurance.  

 

Whole life insurance policies payout when you die, no matter what. Most whole-life policies have an investment element. Therefore, you could tap into the cash value while you're still alive. 

 

You might need to surrender your life insurance to cover: 

 

  • Medical expenses 

  • Unexpected bills 

  • Household repairs not covered by your home insurance 

 

If you’re tempted to cash in your life insurance in the UK, check the small print. Your policy terms will tell you the surrender value of your policy. In some cases, this sum is smaller than the amount of the premiums you’ve paid over the years. You’ll also be asked to pay charges like an early surrender fee. 

Do you get your money back if you cancel your life insurance? 

You're entitled to a refund if you cancel your life insurance in the UK during the 'cooling off period'. According to the Financial Services Regulations 2004, you'll have 30 days to change your mind. 

 

Life insurance is different to other forms of insurance. If you choose to cancel, you won't have to pay off the entire term or be charged for early cancellation.  

 

Think carefully about cancelling your life insurance. You could leave your family and other dependents without a financial safety net. Instead, talk to a life insurance broker about reducing your cover until you can make the payments again. 

What is whole life insurance, and how does it work? 

Whole life insurance does exactly what it says. Your policy has no expiry date. So, no matter what, your family, dependents or other beneficiaries receive a cash payment on your death. 

 

You'll start paying when you take out your policy. And you'll pay premiums for the whole of your life. In return, you'll give your family the gift of financial security when you die. 

 

Advantages: 

 

  • There’s no end date, so the whole of your life is covered. 

  • It provides financial security for your family and dependents. 

  • You won’t pay inheritance tax if used as part of a trust 

  • You build a cash value so you can borrow or even surrender the policy. 

  • It’s easy to understand, giving you peace of mind. 

 

Disadvantages: 

 

  • It’s expensive 

  • It may not suit you if you're young, healthy and single. 

Can I borrow from my life insurance? 

Yes, you can, but only on a whole life insurance policy. You can withdraw a tax-free lump sum up to the amount you’ve paid in premiums.  

 

When you withdraw money without surrendering the policy, it’s like taking a loan. You’ll pay interest on the loan, and the funds will be subtracted from your final lump sum.  

 

You don't have to repay the loan, but the interest will keep accumulating. If you don't repay the loan or the interest before you die, this sum will be subtracted from the final payout

The SpotDif guide to life insurance

What type of life insurance do I need? 

 

The type of insurance you need depends on your age, budget, and the kind of cover you need. 

 

  • Term insurance is an affordable option, giving you coverage for a specific period. It's often used to match the amount of an outstanding debt, like a mortgage. If you decide you want whole life cover, the policy can be converted at a later date. 

  • Whole life insurance gives you peace of mind with a guaranteed payout. It’s a good choice if you can afford the premiums and want to start building some cash value. 

 

What to look out for when choosing life insurance 

 

How much cover will I need? 

 

You’ll need to consider the following when calculating the amount of cover you need: 

  • Bills 

  • Mortgages 

  • Childcare costs 

  • Debts  

  • University fees 

  • Funeral costs 

 

What type of cover will I need? 

 

Term and decreasing term life insurance are popular because they’re affordable. However, they only cover you for the length of the policy, and there’s no cash value. If you want financial security, opt for whole life insurance. 

 

How long will the cover last? 

 

Whole life cover has no end date and only finishes when you die. Term life insurance runs for a set period, for example, to cover the life of your mortgage or your child's education. 

 

Can I afford it? 

 

What you pay for your policy will depend on: 

 

  • Your age: your premiums will increase as you get older and run the risk of developing health conditions. 

  • The amount of cover: The higher the lump sum you want, the larger the premiums you’ll pay. 

  • Policy length: The longer the term, the more you'll pay. 

  • Your health: factors like smoking and a high BMI can affect your premiums. 

  • Your health history: some pre-existing conditions, like stroke and heart conditions, can increase your premiums. 

  • Your lifestyle: the healthier you are, the lower your premiums will likely be. 

 

Why you should compare life insurance quotes 

 

Getting accurate life insurance quotes can be challenging. Using a comparison site to compare whole life and term life insurance quotes can demystify the process.  

 

Before comparing quotes, talk to an insurance brokerage about the insurance cover you want. They'll advise you on the right policy for your circumstances.  

 

You’ll need to compare: 

 

  • The amount of coverage 

  • How much you’ll pay every month in premiums 

  • Rewards and benefits 

  • Exclusions 

 

Comparing costs and benefits at a glance will help you get the best deal. 

 

Now you know more about the different types of life insurance, it’s time to find the right insurance provider with SpotDif. 

Frequently Asked Questions
author
Tansy Dando
Senior Content Manager
I'm always curious to understand and unpick the latest trends for all things wealth and business.
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