LIFE INSURANCE
What would need to carry on if you were no longer here?
Life insurance can provide money for the people or commitments you leave behind. The important question is not simply how much cover costs, but what the payment would need to protect.
A payment cannot replace a person
Life insurance is sometimes described as a way to protect a mortgage. For most families, the need is wider. It may include childcare, everyday living costs, debts, education plans, funeral costs and the time a surviving partner may need away from work.
A life insurance policy, also known as term assurance or life cover, can pay when the insured person dies during the policy term, subject to the policy conditions. The payment can be arranged as a lump sum or, through family income benefit, as a regular income.
The cover should be built around the people who would feel the financial impact. That can include a partner who earns less, a parent who provides unpaid care, an adult child or a business connected to the insured person.
Why this matters
Royal London reported paying £326 million in term life and terminal illness claims during 2025. Its average life claim was £85,437 and its average terminal illness claim was £133,238.
Across individual protection policies, ABI members paid 97.9 per cent of new claims in 2025.
The main forms of term life insurance
- Level term cover keeps the chosen amount broadly the same throughout the term.
- Decreasing term cover is designed to reduce over time, often alongside a repayment mortgage. The rate of reduction may not exactly match the mortgage.
- Increasing cover can rise over time, often in line with an index or fixed rate, to help offset inflation. Premiums may also rise.
- Joint life first death cover can pay once, usually after the first insured person dies. Two single policies may offer two potential claims and more flexibility, but can cost more.
The added benefits some policies include
Some life insurance policies come with support services at no extra cost, which can be used without making a claim. Depending on the insurer, these may include virtual GP appointments, a second medical opinion service, mental health and therapy support, and bereavement counselling for the family. Services vary between insurers and can change, so we compare them alongside the cover itself rather than treating them as an afterthought.
How much cover may be appropriate
There is no universal multiple of income that suits every household. The calculation should consider immediate debts and funeral costs, the mortgage or rent, ongoing household income, childcare, education, existing savings, pension benefits and cover through work.
The term should match the length of the need. That may be the mortgage term, the years until children are financially independent, or the period until retirement income becomes available.
Who receives the money
A policy can be owned personally or placed in an appropriate trust. A trust may help direct the payment to the intended people and may allow it to be paid without waiting for probate, depending on the circumstances. Trusts have legal and tax consequences, so the arrangement must be completed correctly and reviewed when family circumstances change.
A beneficiary nomination, policy ownership and will should be considered together. ERG Finance can explain the insurance options, but legal and tax advice may also be required.
The household work that does not appear on a payslip
Illustrative Scenario
One parent earns most of the household income. The other works part time and provides most of the school runs, childcare and household care. If either parent died, the financial consequences would be substantial. The main earner's income would be lost, or the surviving parent would need to pay for care and reduce working hours. A balanced review values both roles rather than insuring only the largest salary.
What readers need to consider
- Most term life policies have no cash in value. If the insured person survives the term, there is usually no payment.
- Terminal illness benefit definitions and the period before the end of the term vary by policy.
- A policy may include an initial suicide exclusion and other conditions. The exact wording matters.
- Complete and accurate health, occupation and lifestyle information is required. Material misrepresentation can lead to a claim being reduced or declined.
- Tax and trust treatment depend on personal circumstances and may change. Legal or tax advice may be necessary.
Frequently Asked Questions
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It is generally not a legal requirement, although a lender may recommend it and some lending arrangements can include specific conditions. The more important question is whether the household could maintain the mortgage if an insured person died.
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A joint first death policy normally pays once. Two single policies can provide separate cover and may pay twice if both insured people die during their respective terms. The right choice depends on cost, flexibility, cover needs and policy terms.
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Yes, subject to underwriting. Unpaid care has a real financial value because a surviving family may need to replace childcare, transport and household support.
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Some policies include options to increase or alter cover after specified life events without full medical underwriting. Limits and conditions apply. In other cases a new application is needed.
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A trust can be useful, but it is not automatically suitable for every policy or family. The intended beneficiaries, control, flexibility and tax position should be considered with appropriate advice.
You do not need to know which policy you need before speaking to us. Tell us what you are worried about protecting, and we will help you understand the options.
Discuss life insuranceERG Finance provides protection advice from across the whole of the market.
This page provides general information and does not constitute personal advice. Eligibility, underwriting, exclusions, definitions, waiting periods, claim periods and premiums vary by insurer and policy. Cover normally ends if premiums are not maintained. We will explain the features, limitations and costs of any policy we recommend. Tax treatment and trust suitability depend on individual circumstances and may change. Legal or tax advice may be required.