Life insurance basics: when you need cover and which type to choose

If anyone depends on your income — a partner, children, or a parent you support — life cover is usually worth quoting. The payout replaces lost earnings, clears a mortgage or pays funeral costs so dependants are not forced to sell the home or take on unaffordable debt.

If you have no dependants and no debts that would fall to someone else, life insurance is often unnecessary. Single adults with no mortgage may be better off building an emergency fund and pension savings instead.

Mortgage lenders may require decreasing term life insurance assigned to them until the loan is repaid. Even when not required, matching cover to the mortgage term is a common and sensible approach.

Level term insurance pays the same lump sum whether you die in year one or year twenty of the policy. It suits replacing income for dependants over a fixed period — for example until children finish education.

Decreasing term insurance — sometimes called mortgage life insurance — reduces the payout as your mortgage balance falls. Premiums are lower because the insurer's risk shrinks over time.

Increasing or index-linked term cover rises with inflation so the real value of protection does not erode — useful for long policies but more expensive. See our term life insurance guide for underwriting and trust details.

Whole-of-life insurance lasts as long as you keep paying premiums and is virtually guaranteed to pay out eventually. Premiums are far higher than term cover because a claim is inevitable.

The main use case is estate planning — funding a known inheritance-tax bill on property or other assets. Policies are often written in trust so the payout sits outside the estate and can pay HMRC directly.

Over-50s guaranteed acceptance plans are a type of whole-of-life with no medical questions but lower payouts and age limits. Compare total premiums paid against the guaranteed sum before buying.

Life insurance only pays when you die (or sometimes on terminal illness with less than 12 months to live). It does not help if you survive a serious illness but cannot work — that is what income protection and critical illness cover are for.

Income protection pays a monthly income if illness or injury stops you working — usually more important for working-age earners than critical illness alone. Critical illness pays a one-off lump sum on diagnosis of listed conditions.

Many families need term life insurance plus income protection if budget allows. A smaller critical illness lump sum can sit alongside both for one-off costs such as adapting a home after diagnosis.

A starting point is ten times your gross salary plus outstanding debts, but childcare, school fees and funeral costs may push the figure higher. Insure both partners in a dual-income household — replacing unpaid care work has a real cost.

Premiums depend on age, health, smoking status, occupation and cover amount. Guaranteed premiums stay fixed; reviewable premiums start cheaper but can rise sharply.

Compare quotes from at least three sources — comparison sites, a broker and insurers direct. FCA-regulated advisers must recommend suitable cover; check the policy summary and exclusions before you sign.