Best life insurance

Life insurance is a type of cover that provides financial support to you and your family, usually through a lump sum, if you pass away or are diagnosed with a terminal illness.

In exchange for a monthly or annual premium, your insurance provider agrees to pay a lump sum to your beneficiaries if you pass away or are diagnosed with a terminal illness. As your family won't receive your regular income, the lump sum can be used to settle debts, cover funeral costs or help with daily expenses.

Life insurance helps alleviate financial stress for your family in the event of your death. If you pass away, they'll be able to cover the cost of your funeral and pay for other expenses, without needing to worry about money while they're grieving.

Yes, you can have multiple life insurance policies for the same person. You could choose to do this so you can allocate payouts for different purposes, such as one policy to cover debts and another to provide financial support for your family.

You don't legally need life insurance for a mortgage, but most mortgage lenders strongly recommend or require it as a condition of lending. A decreasing term life insurance policy - where the payout reduces over time in line with your outstanding mortgage balance - is a popular and affordable option for mortgage holders.

The main types of life insurance in the UK are: term life insurance (pays out if you die within a fixed term, such as 25 years), whole of life insurance (covers you for life and guarantees a payout), decreasing term insurance (the payout reduces over time, often used to cover a mortgage), and joint life insurance (covers two people under one policy). Critical illness cover is sometimes sold alongside life insurance but is a separate product.

Life insurance pays out if you die during the policy term. Critical illness cover pays out if you’re diagnosed with a specified serious illness, such as cancer, a heart attack or a stroke, while you’re still alive. Some life insurance policies include critical illness cover as an add-on, but they can also be bought separately. Having both is often recommended for comprehensive financial protection.

A common rule of thumb is to aim for cover worth 10 times your annual salary, though the right amount depends on your individual circumstances, including your mortgage, any debts, your family’s living costs and how many dependants you have. It’s worth speaking to a financial adviser to work out the right level of cover for your situation.