What life insurance should you get?

This content was reviewed and approved by Geoff Eaton and Fiona Robson.

Term life insurance explained

Unlike whole life insurance, term life insurance covers you for a fixed amount of time. When the term ends, you will no longer be covered.

Term life insurance can be set up in several ways:

• Level cover life insurance
• Decreasing cover life insurance
• Increasing cover life insurance (only available through a financial adviser)
• Single life cover
• Joint life cover

Choosing the right cover depends on your circumstances and what you want to leave your loved ones in the event of your death. This may include paying off money owed on a mortgage, or to help pay education fees, and other living costs.

What is level cover life insurance?

Level term life insurance is where the amount of cover on your policy, sometimes called the death benefit, remains the same throughout the term. This means the amount of money your beneficiaries get if they need to claim doesn’t change. Level term life insurance is ideal if you want to give any beneficiaries a sum of money to help with replacing your lost income, funeral costs or to cover any fixed debts they may have once you’ve passed.

However, with level term life insurance, it’s worth noting that the sum of money doesn’t account for inflation. This means that while the amount of cover you selected for the policy at the start may have seemed a good amount, it could be worth significantly less in terms of real-life value towards the end of the policy period.

What is decreasing cover life insurance?

Decreasing term life insurance cover is when the amount of cover decreases over the term of the policy. People with capital and interest repayment mortgages or long-term debts often use decreasing term policies as the money they’d need to pay off their debt reduces over time.

Decreasing term life insurance may not give your beneficiaries as much of a payout, but if this is purely to help pay off a mortgage or other debt you’ve also been paying off, then this shouldn’t be an issue. Bear in mind that decreasing term life insurance premiums don’t decrease over the policy, but are usually less than the cost of an equivalent level term life insurance policy.

What is increasing cover life insurance?

Increasing term life insurance (also known as inflation-proofing or index-linked cover) is where the cover amount goes up over the term of the policy. This type is most commonly used to protect the ‘buying power’ of the chosen amount of cover by helping to counteract the effect of inflation, regardless of the amount of debt a person has to pay off. This option is often chosen when a person wants to give their family a good sum of money, regardless of the economic situation at the time the cover is paid out.

With increasing term life insurance, the amount of cover either increases by a fixed amount every year, or increases are linked to an index (for example the Retail Price index (RPI) or Consumer Prices index (CPI)). This amount is commonly determined when you take out the policy, but some insurers may vary. Some insurers may also increase the premiums throughout the policy, but again, this does depend on the policy and the insurer.

Please note: LV= does not offer increasing cover policies directly through LV.com. To find out more, please speak to a financial adviser.

What’s the difference between single life cover and joint life cover?

Once you have chosen the type of life insurance you need, you’ll then have to decide whether you require single life cover or joint life cover. There are key differences between these two options.

What is single life cover?

With single life cover, you decide whether to take life insurance out on your own. If you and your partner both require cover, you can take out individual policies which would pay out separately in the event of the policyholder’s death. Couples can take out separate single life cover policies that pay out different amounts and/or have different lengths of cover.

What is joint life cover?

This is one policy that covers two people such as you and a partner. For a single monthly premium, joint life cover can be cheaper than two separate single life cover policies. However, once one claim pay-out has been made, the policy ends, and the other person is no longer insured.

At what age should you take out life insurance?

You can take a life insurance policy out at any time. However, the type of policy you need is likely to change as you get older, and your priorities also change.

The best policy for you often depends on your family situation, your health, your location, and your age. This guide explains the cover you may need at each stage of your life.

The following information should not be taken as advice. If you have concerns about which type of life insurance suits your needs, please contact a financial or mortgage adviser.

1. Should I take life insurance out in my 20s?

From graduating and leaving your parents’ home to building a career and forging new connections, your third decade is a busy time full of social and financial change.

Life insurance can be useful at any time, by offering loved ones a lump sum if you pass away unexpectedly. However, you may find it’s a lower priority during your 20s, when you’re less likely to have a mortgage and children to think about. Saving into a pension for the first time and raising enough money for a deposit on a new home could prove more pressing financial concerns.

2. How to choose life insurance during your 30s

Life can take many twists and turns in your 30s, whether you’re getting married and starting a family, or buying and renovating your first house. 

This is the age when life cover and other forms of protection can really come into play. For example, if you’ve just welcomed a little one into the world, it’s important that as a new parent, you think about the benefits of life insurance for you and your family.

Income protection insurance and critical illness cover could also play a vital role if your partner and children rely on your salary to pay the mortgage and other essential bills each month.

Income protection policies pay a regular income when you’re unable to work due to an illness or accident. You might also consider critical illness insurance, which can help to financially safeguard your family and home through a one-off payment should you be diagnosed with serious medical conditions, such as cancer, stroke or heart disease, or suffer a life-changing accident.

3. What type of life insurance do you need in your 40s?

Your schedule may become slightly less hectic once you reach 40. It’s a time when many people’s lives settle down as the tribulations of raising young children and setting up a home for the first time fade into memory. 

That doesn’t mean you can forget about the benefits of insurance, however. After all, you may still have a mortgage to take care of, and children who are dependent on you, even though they’re slightly older.

As you progress through your career and your wages rise, you might find yourself in a more financially comfortable position. This could provide you with greater options when working out how to choose life insurance. 

You can read more about life insurance for over 40s in our handy guide. 

4. What’s the best life insurance option for people in their 50s?

Your 50s can prove to be a transitional decade between working life and retirement. With many people given the chance to start withdrawing their pension savings from 55, it’s understandable if your focus falls heavily on retirement planning.

Life insurance is worth keeping hold of at this time, even as your financial circumstances shift. You may still need to support your children with university fees or a housing deposit, for example, and your life insurance policy could help cover those expenses if the worst happened.

You may have heard of specific over 50s life insurance policies. These are a form of whole of life insurance and the plans provide a guaranteed payout when you die.

As you are not usually asked any questions about your health and are guaranteed to be accepted for cover, the cost is relatively expensive for a small amount of cover, however if you survive to the end of your policy term, your policy ends, you’re no longer covered and you won’t get anything back. You can read more about life insurance for over 50s.

Please note, LV= no longer offer whole of life policies.

5. Do I need life insurance in my 60s?

As you head towards and into retirement, life insurance may feel less relevant. Your children are likely to be fully independent – and may even have youngsters of their own – while your mortgage may be paid off. 

However, over-60s life insurance and over-70s life insurance might still be options to consider. These can help cover the cost of funerals, bills and outstanding debt, among other things. A life insurance pay-out to your loved ones could even be used as a small gift after you’re gone. To help make sure the pay-out goes to the right person, it can also help to make sure this is detailed in, for example, a will.

FAQs

What’s the best life insurance option for couples?

The best life insurance policy will depend on the needs of you and your partner. You may have a choice between ‘single life’ and ‘joint life’ cover. A single life policy insures each person, paying out a lump sum if they pass away. With a joint life policy, both members of the couple are insured for the same term, with the same amount of cover. A pay-out is normally made on the first claim at which point the cover stops and the surviving partner is not insured.

What conditions can critical illness insurance cover?

Critical illness insurance is designed to support you financially if you are diagnosed with one of the specified conditions or injury included in the policy you choose. 

Critical illness insurance can cover significant medical conditions such as:

• Cancer
• Strokes
• Heart and circulatory disease
• Alzheimer’s disease
• Multiple sclerosis
• Parkinson’s disease

Its worth checking the insurer’s policy documents to check what is covered. Each provider lists the conditions they cover and the definitions they specify for that condition/illness.

How long does term life insurance last?

Your life insurance cover will last for the term you select at the beginning of your policy. The available terms differ between insurers, but you can typically choose a policy lasting between five and 50 years.

Still not sure what life insurance to choose?

If you are looking for impartial advice, you can request a callback from LifeSearch today.

Or alternatively, if you know the type, amount and term of cover you want with cover starting , LV= offers a range of life insurance options from £5 per month that can provide your loved ones with financial security should you pass away. Get an LV= life insurance quote today.