Life Insurance

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What is Life Insurance?

In its simplest form, a life insurance policy can financially protect your family or other dependents should you die whilst your policy is in place. The money received from a life insurance policy can help your family during an extremely difficult time, for example, by paying off your mortgage and debts, covering bills & expenses as well as providing money for your loved ones to live from.

Life insurance may appear to be a complicated subject at first glance but it’s actually quite straight forward and in this guide we’ll cover the various options available to you and address a number of questions that you may be wondering.

What types of life insurance are there?

The best place to start is to look at the various types of life insurance available to you:

Level Term Life Insurance

Level term policies pay out a fixed amount of money should you die during a fixed time period, called the term. Both the pay-out amount and length of time are set by you when arranging the policy. With a level term policy the amount received by the people you leave behind remains the same whether you die after one year or 20 years into the policy. Should you live through the term of policy, your policy will expire with no pay-out due. Prior to the end of the term you may wish to explore extending your policy with your current provider or arranging a new policy once your current one lapses. Find out more about level-term life insurance policies here.

Decreasing Term Life Insurance

As the name suggests, a decreasing term policy pays out an amount that decreases over the term of the agreement. This type of policy is typically taken out to cover the outstanding amount of a repayment mortgage which will also decrease over time. Due to this, a decreasing term policy will often be cheaper than a level term policy as the pay-out will be significantly less should you die towards the end of the policy compared to nearer the beginning. Find out more about decreasing term life insurance policies here.

Joint Life Insurance

A joint life insurance policy provides cover for two people, typically a couple, should one of them die. Policies come as either “first death” or “second death”, whereby a first death policy will pay out the pre-agreed amount to the surviving policy holder and a second death policy will pay out only after both policy holders have died during the term of the policy. Should both policy holders die at the same time then a dependent will receive the pay-out. Find out more about joint life insurance policies here.

Whole of Life Insurance

Whole of life insurance, also known as life assurance, covers a policyholder for the rest of their life, which always pays out when you die (as long as your monthly payments have been kept up to date). A typical use for a whole of life insurance policy is to offset inheritance tax that would become due upon your death. Find out more about whole life insurance policies here.

Over 50s Life Insurance

Over 50s life insurance is a type of whole of life policy that guarantees acceptance for those aged between 50 and 80 with no medical questions required. The pay-out amount is fixed, as is the amount you pay each month. However, because you are not required to take a medical or answer other questions, the pay-out amount (or sum assured) is typically less than a whole of life insurance policy. Find out more about over 50s life insurance policies here. Monthly payments are made for an agreed period of time and if you survive that period you will longer have to make monthly payments but your family will still receive the sum assured when you pass away.

What does life insurance cover?

Life insurance policies will not pay-out for death caused as a result of certain activities or illnesses. These vary dependent on your policy wording so it is extremely important that you understand any exclusions prior to taking out a policy.

When you get a life insurance quote through Quote Goat, you will be able to discuss policy exclusions with your life insurance broker, who will also be able to arrange a suitable policy according to your situation.

Typically, life insurance could be invalidated should a death occur from drug and alcohol misuse, some high-risk activities, pre-agreed conditions, disabilities or chronic illness. Again, you should make sure to discuss this when you get a quote as exclusions vary between policies.

How much does life insurance cost?

The cost of your policy depends on several factors as well as the type of policy you choose.

Factors that affect the cost of your policy include:

  • Level of cover
  • Duration of cover
  • Age
  • Smoker Status
  • Lifestyle – e.g. how much do you drink? Do you exercise?
  • Medical History
  • Optional extras such as critical illness cover

As a rough guide, life insurance with £100,000 of cover can start from as little as £5 per month for a healthy, non-smoker in their 20s and it increases from there.

Tip: The earlier you take out a life insurance policy, the cheaper your monthly payments will be.

How much life insurance cover do I need?

Ultimately this will depend on your situation and how much you want your family to receive if the worst should happen.

Areas that you should consider are:


How much do you owe on your mortgage and would you want your life insurance policy to pay off your mortgage? Could your family afford to keep up with mortgage payments without you? This applies to those who contribute an income to the family as well as stay at home parents, who for example, may look after the children whilst your partner works.

Outstanding Debts

You may also wish to include any outstanding debts when working out how much cover you require.

Ongoing living costs, bills & other expenses

Could your family meet ongoing living costs as well as pay the bills and other expenses should you die? Dependent on your circumstances, you may want to include enough money in your life insurance to cover ongoing living costs.

Of course, a higher level of life insurance cover means a higher premium, so you will want to find an affordable balance between your pay out amount and how much you can afford to pay on a monthly basis.

Life Insurance Pay-outs and Trusts

You may wish to put your life insurance policy in trust as this can avoid your beneficiaries having to pay inheritance tax on the cover amount. Further information surrounding this can be obtained from your life insurance provider or a solicitor.

How Do I Compare Life Insurance Providers?

When it comes to choosing a life insurance policy, the cheapest option is not necessarily the best. To find the most suitable policy you will need to take the time to compare life insurance quotes from different providers and work out which is most suitable for your requirements. Quote Goat make it easy to compare life insurance by submitting your details to a panel of life insurance brokers who will then contact you to discuss your requirements and provide you with tailored quotes.

Getting a no obligation quote is free and takes less than a minute to fill out the form, so why not run a life insurance comparison today and see how much cover you can get at competitive rates.

Life Insurance Frequently Asked Questions

When should I take out life insurance?

Most people will take out life insurance as a result of a life changing event, e.g. the birth of a child. However, you need not wait for such an event before you take out a policy, taking out a life insurance policy when you are younger will result in lower monthly payments, so there may be no time like the present, particularly if you have people who depend on you financially.

I have a pre-existing medical condition, can I get life insurance?

People with pre-existing medical conditions can still get life insurance, however you will most likely end up paying more and you may find less life insurance providers are willing to cover you.

Does my employer’s life insurance cover me?

Your employer may provide you with a type of cover known as death in service benefit. This policy typically pays 4 times your salary and is often seen as an addition to a life insurance policy.

Do mortgages require life insurance?

Many mortgage providers will require you to have a life insurance policy that covers the outstanding amount of your mortgage. However, you do not need to take out a policy through your mortgage provider or broker.

If my term expires and I’m still alive, do I get my money back?

No, if you are alive at the end of your policy then your premium payments are not refunded. You may be able to extend your policy or you could look at taking out another policy should you require it.

I used to smoke, how does that affect me?

Each insurance provider may be different, however you will typically be classed as smoker if you have smoked in the last 12 months prior to taking out a life insurance policy.

Written By Michael Foote, Insurance and Finance Expert

Michael Foote is the founder of Quote Goat and has over 13 years experience working in the finance, insurance and currency sectors. Since launching Quote Goat he has appeared on TV as well as many of the largest online publications including Forbes, The Telegraph and The Metro. Prior to Quote Goat, he worked in finance in the city for a number of firms including HSBC.