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Types of Life Insurance

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Life insurance helps you to protect the ones you love if the worst happens

There are many different types of life insurance cover available, and it can be confusing to know what type to opt for. 

Choosing the right cover means thinking about what you need to protect the people you love. This can include any money you owe, like a mortgage and the cost of living now and in the future.

To help you, we’ve explained some of the main options you can choose on your policy and how it will affect your payout if you need it.

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.

What are the different types of life insurance?

When researching life insurance, you may have seen lots of different types mentioned. Here’s what each of them are at a very top level.

Term life insurance

Term life insurance covers you for a fixed number of years, agreed when you took the policy out. Term policies only provide a death benefit while the policy is active. You can take out a level or a decreasing term life insurance policy.

Whole of life insurance

Whole of life insurance policies cover you throughout your life until you die. There’s no fixed end date, it’s simply when you pass away. It’s not as common to see whole of life insurance policies. Some providers may also offer over 50s life insurance, which will last for the rest of your life. Please note, LV= no longer offer whole of life policies. 

How can you take life insurance?

Joint life insurance

A joint life insurance policy covers two people. It pays out when one person on the policy passes away. The policy ends after this. It’s commonly used by couples with children to ensure the remaining family is protected or to pay off a jointly held mortgage.

Single life insurance

Single life insurance covers just the policy holder and pays out on their death. Once the policy holder has passed away, the policy ends.

What can you add to life insurance?

Critical illness cover

While life insurance pays out on death, critical illness cover will pay out for specific critical illnesses or injury which could be life changing. It adds an additional peace of mind for you and your loved ones. 

Children’s critical illness cover

Children’s critical illness cover provides money to help you to care for your children if they were to be diagnosed with a life changing illness. 

Level or decreasing cover

Level cover life insurance

Reasons for choosing ‘level cover’

  • Level cover pays out a lump sum should you die during the term of the policy. You can leave this money to your family and dependants or pay off a mortgage.
  • It provides certainty as both the cover amount and your premiums are fixed for the term.
  • You can choose both the amount of cover in money and the term - from 5 to 50 years.

Reasons for not choosing ‘level cover’

  • Level cover is usually more expensive than decreasing cover.
  • It doesn’t keep up with inflation and will be worth less in the future.

Decreasing cover life insurance

Reasons for choosing ‘decreasing cover’

  • The amount of money you’re covered for reduces year on year, making this a good option to cover the reducing amount you may owe on a capital and interest repayment mortgage or other loans.
  • It provides you with a lump sum of money that decreases usually in-line with your debt.
  • Your premium remains the same for the duration of your policy.
  • Decreasing cover’s monthly premiums are usually cheaper than level cover.
  • You can choose both the starting amount of cover in money and the term - from 5 to 50 years.

Reasons for not choosing ‘decreasing cover'

  • If you have an interest-only mortgage or you are planning to make under or overpayments this product may not be suitable for you.
  • Depending on interest rates and when you die, the amount of money paid may be more or less than the amount you owe on your mortgage or loan.

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Choosing the amount of cover and term that's right for you

Once you’ve chosen the type of insurance you want, you need to consider the cover term and amount of cover. The cover amount, which is how much you want your death benefit to be, is commonly calculated based on how much you would need to pay off a mortgage and provide support to your loved ones to cover funeral costs or any other financial burdens. The other decision if you are taking term life insurance is how long you want the policy to last.


How long do you need your cover to last?

  • Our life insurance and life with critical illness cover can run between 5 to 50 years.
  • If the money is going to be used to help pay the costs of raising your children, you might want your life insurance policy to end once your youngest child is old enough to financially support themselves.
  • If the money is to be used to repay a mortgage, you may want your term to end when the mortgage is fully repaid.


For many people, how much they can afford is also important

To help you decide how much you need, think carefully about the financial needs of your family or dependants.

  • Protecting your home 
    Often your property is one of the biggest investments you will make in your lifetime, so it would make sense to protect your home, should anything happen to you. You can then be comforted knowing that your family won’t have this financial burden when they are facing a difficult time and they can remain in your home for their future.
  • Protecting your partner 
    If anything should happen to you then your partner will need to still take care of the household expenses and bills. Think about your regular household expenses and savings to understand how long your partner could last without your income and how much money the family would need.
  • Protecting your children 
    The cost of childcare is one of the biggest expenses for the family; especially if your children are thinking of attending college or university in the future, so think about how you can protect those opportunities for your children.

Single or Joint cover

Single and joint life cover explained

Single life cover

person in front of a heart
  • Insures only you and pays out if there is a claim during the plan term.
  • You can take single life plans as a couple. If you both take out a plan, if one person claims their plan would pay out, and the other person’s plan would continue, and they would still be covered.
  • This is unlike a joint plan, which only pays out once when the first person claims. The plan then ends, and the second person is no longer covered.

Joint life cover

couple surrounded by a heart
  • Covers both people insured for the same amount of cover and length of time.
  • The plan pays out for the first claim only.
  • After that, the plan stops and the surviving person is no longer covered.
  • Taking out a joint life insurance plan normally costs less than two single plans.
  • Usually taken out where the death of either person will have a significant impact on the lifestyle of the other, particularly where there are children involved.

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