Life Insurance Explained UK

You apply for cover, answer health and lifestyle questions, and choose the level and term of protection. If the insurer accepts the application, you pay regular premiums to keep the policy active.

If you die during the policy term, or in some cases are diagnosed with a terminal illness that meets the insurer’s definition, the policy pays out a lump sum. The cost depends on age, health, smoking status, policy type and how much cover you want.

• Level term assurance: the payout stays the same throughout the policy term.
• Decreasing term assurance: the payout reduces over time, often to track a repayment mortgage balance.
• Critical illness cover: pays a lump sum if you are diagnosed with one of the listed serious conditions in the policy.

These options are designed for different jobs, so the “best” one depends on what you are trying to protect.

Level term life insurance keeps the cover amount fixed for a set term. That makes it useful when you want the payout to remain the same throughout the policy, for example to support children, replace income for a number of years, or provide a lump sum for a partner.

• Fixed premiums: the cost usually stays level for the term.
• Fixed payout: the amount paid out does not reduce.
• Pure protection: there is no savings or cash value element.

Decreasing term assurance is usually used alongside a repayment mortgage. The amount of cover reduces over time, broadly in line with the amount you still owe.

• Mortgage-focused: commonly used to help clear a repayment mortgage if you die during the term.
• Lower premiums: because the cover reduces, it is often cheaper than level term cover.
• No cash value: it is still a protection-only product.

Critical illness cover is different from life cover because it can pay out while you are still alive if you are diagnosed with one of the serious illnesses listed in the policy wording.

• Tax-free lump sum: the money can be used for treatment, household bills or time away from work.
• Condition-specific: the insurer only pays for illnesses and definitions listed in the policy.
• Often combined: many people buy it alongside life insurance for broader protection.

Yes, depending on the insurer and the policy structure. Some people choose separate single policies, while others choose joint life cover. The right option depends on budget, flexibility and what would happen if one person needed to change or cancel cover later.

Tip: Ask whether the insurer or adviser recommends separate or joint plans for your situation, because the answer is not always the same for every family.