What does life insurance cover?

7 minutes

The information on this page should not be considered as financial advice. If you are unsure what’s right for you, please make sure you speak to a financial adviser.

Life insurance is a type of insurance you take out against your own life to provide your loved ones with a sum of money when you pass away. People take out life insurance policies for all sorts of reasons, including to cover the cost of paying off a mortgage or larger debt.

This page covers what life insurance can cover generally. For more specific information around types of life insurance and cover options, please read our guide on types of life insurance. 

What is life cover?

Life cover, also known as life insurance, pays out a sum of money if you pass away during the policy term. You can take life insurance out with critical illness cover if you also want to receive payouts if diagnosed with specified illnesses or injuries from life changing accidents.

You pay monthly premiums to your life insurance provider, and in return they provide you with an agreed amount of cover over the term. Life insurance can be taken out on a level, decreasing or increasing basis. Level life insurance is where the amount of cover and therefore the amount paid out stays the same throughout the policy, whereas with decreasing life insurance the amount of cover and therefore the payout amount reduces each year. Decreasing term life insurance is typically used to cover a reducing amount on a capital and interest repayment mortgage.

If you pass away, as long as your policy is still active, then your loved ones will receive the payout.

Why might you need life insurance cover?

People take life insurance out for a variety of reasons, and there’s no one right answer to why you might need cover. Instead, it’s worth looking at your current circumstances and seeing if it’s right for you.

Some of the primary reasons that people take life insurance for protection in the event of their death are:

  • Starting a new family and wanting to be able to protect your partner’s and newborn’s financial security 
  • Buying a home  and wanting to ensure the mortgage is paid off
  • Starting a new job and wanting to provide a lump sum in place of your income 
  • Moving away from loved ones 
  • Wanting to continue to support your family as they start their own

When taking out life insurance, it’s important to understand what a policy would mean to you and your loved ones. These questions will help you to not only understand the reason for life insurance but also help you to decide on how much cover and the type of life insurance you want to take out. If you are thinking about taking out life insurance, then you should ask yourself:

  1. What would be the financial implications if I died?
  2. Do I have any financial dependents?
  3. Are there any large debts I have that my loved ones would have to pay off on my behalf?
  4. Can I afford to pay for monthly premiums?
  5. What costs would need to be covered if I passed away such as funeral costs, cremation fees or costs to carry out my wishes in my will?

It can be hard to think about questions like these sometimes, but it is an important part of taking out life insurance.

What can the payout from life insurance cover?

While people use the payout for life insurance for a variety of reasons, most people use it to pay off a mortgage or large debt to ensure they are able to move forward with less financial worries or stress.

The payout can also cover (but not limited to): 

  • Funeral costs
  • Education fees
  • Providing an Inheritance
  • Inheritance Tax
  • Tax return costs
  • Solicitors’ fees
  • Living expenses
The life insurance policy can either be placed into trust or the proceeds paid to your estate. If you haven’t stipulated in your will where you want the money to go, then it will be down to the executors of your estate to decide.

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What doesn’t life insurance cover?

Life insurance payouts and policies don’t cover everything. What they won’t cover, generally across different insurance companies is, for example, 

  • Taking your own life within the first 12-24 months after the policy is taken out a
  • Anyone who deliberately provides false or inaccurate information when they apply for the policy, make a claim, or apply to re-start a lapsed policy.
  • Anyone who is involved in, or commits financial crime.

Other circumstances when claims may not be paid can vary, so check the list of exclusions in the policy documents.

Who does life insurance cover?

Life insurance covers the policy holder(s), and on their death, will pay out to the named beneficiaries. If you have a partner and want to get joint life insurance, where one policy covers both you and your partner,  this typically pays out on the death of the first life insured. However, check with your insurer if you wanted the payout made after the last surviving beneficiary passes away, known as joint life, second death .

Some people also choose to add critical illness or children’s critical illness cover, which provides a financial payout if you or your child is diagnosed with a specified critical illness. The illnesses each insurer covers can vary, so check the list of condition they specify for each kind of cover.

What are the different types of life cover?

There are various types of life insurance: term (for a fixed period) and whole of life (cover for your entire lifetime).

  • Term life insurance can be level (same payout throughout) or decreasing (payout decreases over time) and is often used to cover specific debts or needs over a set period of time.
  • Whole of life insurance guarantees a payout upon death whenever this  happens, but premiums are typically higher and it may not be offered by all providers.
  • Joint life insurance covers two people and pays out when one passes away, while single life insurance covers one person.
  • Critical illness cover can be added to life insurance policies, providing payouts for specific serious illnesses or injuries. Check too if they cover Children’s Critical Illness cover.

How to take out life insurance

If you’re looking to take out life insurance, and know exactly what you want, then the first step is to get a quote. This will help you to understand how much it could cost you per month as well as whether you’d be eligible. Different providers have different requirements so it’s best to shop the market to see what would work for you and your circumstances.

If you’re still unsure about exactly what you need, please talk to your financial adviser or mortgage broker. If you  haven’t got one, you  can find one at

Are you looking to arrange life insurance?

LV= offer a range of life insurance products that provide you with cover. Get a life insurance quote today.