What is life insurance?

Put simply: it’s an insurance policy that pays out if you die. Term life insurance is the most common kind, covering you if you die within the ‘term’ of your policy. People often get this kind of cover to insure them while they have other fixed-term financial commitments – a mortgage being the most obvious example. You can time it so that your mortgage and life insurance terms end at the same time. Ultimately, it can be used to make sure no-one else would be left liable for your outstanding debts (like a mortgage) if you died.

What's the best life insurance for me?

When trying to work out the ‘best’ life insurance for you, the main things to consider are: what financial commitments you have and what financial dependents you have. On top of that, you need to think about the nuances of each, like: how much do your commitments amount to and will they end at some point in the future? How many dependents do you have, what’s the nature of their dependency, and could they be financially independent at some point in the future? And how would all of this change without you around?

Ultimately, the best life insurance for you is the cover that would sufficiently meet the needs you have now and the needs you think you’d have in the future.

Find the best cover for you

How much life insurance do I need?

To work out how much life insurance you need, it can be useful to think about what the lump sum would actually be used for. In lots of cases, this would change over time – i.e. what it’d be needed for if you died in 5 years’ time, for example, is different to what it’d be needed for in 25 years’ time. Equally, how much would be needed in 5 years is likely to be different to what’d be needed in 25 years. Lots of people take out life insurance to protect things like:

  • Outstanding debts (like a mortgage or personal loan)
  • The living expenses and lifestyle costs their family would still have if they died
  • University fees or school fees for their children

Depending on what you’re trying to protect, and what will happen to your protection needs over time, there’ll be different types of policies to suit you. If the amount you’d need in the future is less than what you’d need tomorrow, you might go for a decreasing policy. If the amount will always stay the same, or go up, you might choose a level or increasing policy.

Ultimately, getting life insurance is about trying to make sure the things that are important to you will be paid for or protected after you die. That could mean something tangible, like a mortgage, or something less tangible, like making sure your family has enough money to maintain their lifestyle if you were to die.

Best life insurance companies

The ‘best’ life insurance company is the one that has the right policy for you. This is likely to be different per person. Many people might think the ‘best’ company is the one that offers the most affordable policy, but there are so many other factors to take into account with life insurance that this isn’t always the case. It can also help to know how favourably (or not) different insurers will look on your application depending on your circumstances – including your health, lifestyle and finances.

Comparing life insurance companies is often about finding the best value for money based on your unique circumstances. You can’t compare how much would be paid out (because that amount would be the same, depending how much life insurance you want to buy) – but you can compare the cost of insuring that amount over the same period of time; the number of exclusions, benefits and degree of flexibility a policy has; and what % of claims providers pay out. And so on.

Life insurance price comparison based on smoking status


The following prices are based on:

  • 30-year-old, male or female office worker
  • £300,000 of level life insurance cover for 25 years
Insurer/product Non-smoker Smoker Anorak review
Aegon
Personal Protection
£12 £19.35 Read our Aegon life insurance review
AIG
YourLife Plan Term Assurance
£11.35 £19.90 Read our AIG life insurance review
Aviva
Life Insurance +
£12.36 £18.31 Read our Aviva life insurance review
Canada Life
Life Insurance
£11.69 £20.15 Read our Canada Life life insurance review
Legal & General
Life Insurance
£11.03 £17.97 Read our Legal & General life insurance review
LV=
Life Protection
£13.19 £23.72 Read our LV= life insurance review
Royal London
Personal Menu Plan
£11.54 £22.40 Read our Royal London life insurance review
Scottish Widows
Protect
£12.76 £23.11 Read our Scottish Widows life insurance review
VitalityLife
Essentials Plan
£11.42 £20.34 Read our VitalityLife life insurance review
Zurich
Personal Protection
£12.49 £20.21 Read our Zurich life insurance review

Quoted on 14/02/2020

Life insurance price comparison based on age


The following prices are based on:

  • Healthy, non-smoking, male or female office worker
  • £300,000 of level life insurance cover for 25 years
Insurer/product 25 year old 35 year old 45 year old Anorak review
Aegon
Personal Protection
£8.90 £14.32 £29.31 Read our Aegon life insurance review
AIG
YourLife Plan Term Assurance
£8.11 £13.29 £27.44 Read our AIG life insurance review
Aviva
Life Insurance +
£7.41 £14.51 £31.33 Read our Aviva life insurance review
Canada Life
Life Insurance
£8.88 £13.39 £30.52 Read our Canada Life life insurance review
Legal & General
Life Insurance
£7.24 £12.38 £29.09 Read our Legal & General life insurance review
LV=
Life Protection
£10.27 £14.48 £32.06 Read our LV= life insurance review
Royal London
Personal Menu Plan
£8.15 £13.88 £29.10 Read our Royal London life insurance review
Scottish Widows
Protect
£8.23 £15.14 £31.85 Read our Scottish Widows life insurance review
VitalityLife
Essentials Plan
£8.04 £13.30 £30.04 Read our VitalityLife life insurance review
Zurich
Personal Protection
£9.86 £13.58 £32.50 Read our Zurich life insurance review

Quoted on 14/02/2020

Understanding life insurance policy features

One way to compare any insurance policy is to consider what features, benefits or exclusions they do or don’t have. The trouble with life insurance is that most policies come with similar (if not the same) set of features, so it can be tricky to tell them apart. This is one of the reasons people get stuck when trying to choose what to buy.

Terms and features What it means and how it works
Exclusions Having an exclusion on your life insurance policy means there are certain circumstances in which your insurer wouldn’t pay out the lump sum. Most life insurance policies exclude suicide, for example, if you die by suicide within a year of taking out the policy.
Guaranteed premiums Having guaranteed premiums means the amount you pay each month to be insured (the ‘premium’) will always stay the same. If you have a level policy, this means you’ll always pay exactly the same amount each month for as long as you hold the policy. If you have an increasing policy, your premiums will increase at a guaranteed rate, in line with inflation.
Guaranteed insurability Having guaranteed insurability means being able to increase your life insurance cover after certain life events – without going through medical underwriting again. This usually includes things like: getting married or entering a civil partnership; becoming a parent; taking out a new mortgage or remortgaging; getting a significant pay rise; and so on.
Waiver of premium Waiver of premium is a handy add-on that means you don’t have to pay your monthly life insurance premiums if you’re off work for medical reasons for a certain period of time. This can really help you out at a time when you might otherwise be financially struggling – and you’ll still be covered by your policy even while your payments are being waived.
Terminal illness benefit Having terminal illness benefit means your insurer will pay out your lump sum early if you get a terminal diagnosis. For most insurers, this means a doctor saying you have a year or less to live.

What not to worry about

Worrying about whether or not an insurance policy will pay out when you need it to is not uncommon. Lots of people do. But with life insurance, this shouldn’t be a concern, because it’s a policy that pays out if you die – so it’s pretty black and white.

That said, there may be some variations in your policy that make things a little more grey – like terminal illness benefit (which may mean the lump sum is paid out early) or suicide exclusion (which may mean it’s not paid out at all). It’s important to be aware of these. It’s also important to provide accurate, honest information when you apply for the policy, so your claim doesn’t get rejected because of misrepresentation.

Beyond that, all insurers are covered by the FSCS (Financial Services Compensation Scheme) – so if the insurance company folded, your payout would be safe. Last up, to have the best chance of the right person/people receive the payout straight away, it’s worth making sure they know about your life insurance policy and where to find the details.

Anorak makes it easy not only to find the best life insurance – but to find the right life insurance for you. By analysing your profile, we can calculate your cover needs and quickly match you to products based on their suitability for you.

How? Well, we’ve delved into the policy details across all the major insurers’ products, unpacked it all and plugged it into our online service. In other words, we’ve done all the hard work – so you don’t have to. Giving you a quick and efficient way to buy the right cover.

Good to know: Our recommendations are regulated, completely impartial – and free. And we also have a team of human advisers who can help over the phone, if you prefer.

This guide is intended for informative purposes only and does not constitute advice.