Life Insurance: Which Policy Is Right for Me?

Getting the right life insurance policy depends on how much money your dependants need in the event of your death, how long you need cover for and how you want the money to be paid. This guide will help you understand the differences between policies and how they work so you can confidently choose a policy that accommodates your individual needs.

How long do you need to be covered for?

Until you die

If you want to be covered until you die, you should consider a whole of life insurance policy. This type of policy pays out when you die, no matter how old you are or how long you’ve had the policy for.

Whilst you pay off a long term debt

Decreasing term life insurance policies are designed to run alongside any long term debt you have, such as a mortgage. This type of policy is taken out for a specific number of years and the payout decreases over time, in line with your debt.

You could also consider a level term life insurance policy. Like decreasing term life insurance, this is taken out for a specific number of years, however, the payout stays the same for the entire length of the policy.

Cover as you get older

If you choose to take out a life insurance policy when you’re older, the premium will typically be more expensive. This is normally because you’re closer to your life expectancy age or you’ve developed health issues. If you do find that premiums are expensive or you’re struggling to get accepted, an over 50s life insurance policy might be best for you. This type of policy guarantees acceptance and premiums are often cheaper.

How would you like the money to be paid?

Depending on the policy that you choose, there are two types of payout available:

Lump sum

A lump sum provides your loved ones with the payout all in one go. They can use this money to pay off your existing debts and also have money left over to live off. Most life insurance policies offer this type of payout.

Income

An income will provide your family with regular payouts, so they can use the money to pay off monthly bills. You can normally be paid an income if you take out decreasing term life insurance or level term life insurance. However, because the policy is only fixed for a number of years, the income will come to an end when the term length ends.

Who needs to be covered?

If you want to cover yourself and a partner, you should consider getting a joint life insurance policy. Often, this type of policy is cheaper than taking out two individual policies, however, it only pays out once. You can choose whether it pays out after the first or second death but if it pays out after the first death, the policy will end and the survivor will no longer be covered.

What type of policy can I get?

Level Term Life Insurance

The policy lasts for a fixed number of years and the payout remains the same for the length of the policy.

  • The payout is fixed for the length of the policy
  • The premium stays the same throughout the policy
  • Premiums are often higher
  • There’s no payout if you outlive the policy length

Decreasing Term Life Insurance

The policy lasts for a fixed number of years and the payout decreases over time.

  • Premiums are often lower
  • The premium stays the same throughout the policy
  • You normally only cover the cost of your loan, so there won’t be any money left once the loan is paid off
  • If the payout decreases quicker than the interest rate of your loan, you could be left with a shortfall at claim
  • Doesn’t work if you have an interest only mortgage

Whole of Life Insurance

This type of policy covers you for your entire life, so your loved ones will get a payout no matter when you die.

  • Your family is guaranteed a payout
  • The premium stays the same throughout the policy
  • It builds cash value over time as you pay your premiums
  • Premiums are typically more expensive
  • Some of your premium is invested so it’s a more complex policy compared to others

Over 50s life insurance

As the name suggests, this policy is specifically for people aged 50 and over.

  • You’re guaranteed acceptance regardless of your health or lifestyle
  • You don’t need to submit any medical records when applying
  • Your family is guaranteed a payout
  • If you miss a payment, your policy will end and you’ll lose all of the money you’ve already paid into the policy
  • If you die during the qualification period your loved ones won’t receive the full payout
  • The cash benefit is determined when you take out the policy so as time goes on, inflation will reduce the value of the payment amount
  • You could pay more into the policy than your loved ones receive

Family Income Benefit Insurance

This type of policy is fixed for a certain number of years and the payout is received in monthly payments.

  • Your family will receive a regular income in the event of your death
  • Premiums are often low and affordable
  • Avoids the complications of managing a large lump sum of money
  • Only pays an income if you die during the term
  • Not suitable for clearing large debts
  • You can’t claim money back if you don’t die during the term
  • Only pays out the remainder of the term, which could be as little as a few months

Joint Life Insurance

This type of policy insures two people, however, it only pays out once.

  • Often cheaper than taking out two individual policies
  • It pays out regardless of which partner dies first
  • It’s available to any couple, whether that’s business partners or a married couples
  • If both policyholders die at the same time, the insurer will still only pay out once
  • If the relationship ends, the policy can’t be split so will have to be cancelled
  • If one policyholder has poor health, the premium might be higher

Compare life insurance providers

If you’re considering taking out a life insurance policy, check out our comparison table. We rank life insurance providers exclusively on product quality and the service they deliver to customers to ensure that you can get a high-quality policy from a provider that promises to be there for you when you need them.

Beagle Street

Ranked 1 of 10

Life Insurance providers

Beagle Street

LV=

Ranked 2 of 10

Life Insurance providers

LV=

Royal London

Ranked 3 of 10

Life Insurance providers

Royal London