17 November 2018

Life insurance cover: what kind do I need?

7 min read



Of course, there is no best, only what’s best for you. The length and cover varies widely, but whether you are looking for whole-of-life insurance, need insurance that covers you without a medical examination, or are looking to protect your mortgage, you can find a policy that suits your requirements.

There are different types of insurance to cover all the different stages of your life – mortgage insurance and life insurance being two of the more common types of cover.

What types of insurance are available?

Put simply, life insurance protects your loved ones should you die. It provides peace of mind that if you are no longer around, your family will benefit from a lump sum or a regular monthly income and have financial security.

It’s important for people with children, dependant relatives, a partner or family. It can help pay bills and the mortgage if you were to die and can provide financial help at a time when your family might need it most.

Cover is also worth considering for a partner who works part-time or is a homemaker, since paying a non-family member for childcare and housework duties would involve considerable extra costs.

Having protection in place could help towards:

  • paying off some or all of the mortgage
  • providing a lump sum to cover household bills
  • making up an income shortfall 

Types of insurance

Level insurance – the amount of cover stays the same over the length of the term.

Decreasing insurance – the amount of cover decreases each month, perhaps because your costs are likely to fall towards the end of the term, your children are less financially dependent on you or your mortgage debt is getting smaller as you gradually pay it off.

Family income benefit – this is designed to replace your income if you die. The policy runs for a set period of time, known as the term. If you die within this period, the policy pays out a regular tax-free income until the end of the term. This makes it different from traditional life insurance, where your family receives a single lump sum on your death.

Life insurance

Life insurance is very simple. It pays out on your death or diagnosis of a terminal illness. There is no savings or investment element to it, so premiums tend to be relatively simple and low cost, although the amount you pay will depend on your age and health when you apply for cover. You pay a monthly premium for a set term, usually to cover the length or your mortgage or until the children have finished college and left home.

Premiums (the amount you pay each month) do tend to increase the older you are when you take out your policy. The potential lump sum payout can also be worth less if your household costs go up, so whenever your costs go up (for example when a child goes to university, or you move to a bigger house) check that your policy amount will still be enough to cover all your costs if you were to die. 

Critical illness or Serious Illness Benefit

Critical illness is sometimes available as an extra option when you are buying life cover. It insures you against a range of common but serious health complaints, including cancer, heart attack or stroke.

Some providers offer serious illness benefit cover which differs from Critical illness cover. It covers common illness

Insurance when you are older

It can be more difficult and costly to arrange life insurance once you are aged 50 or older. However, over-50s’ life cover is designed to enable you to leave your family money after your death, either as a gift or to cover funeral costs. It’s typically available from age 50 to age 80.

Taking steps to protect your family now will give you peace of mind. When you are considering life insurance it’s important to think about why you might need it, how long you would like the cover to last, and what type of insurance suits you best.

Royal London offers a range of life insurance products

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