Buying life insurance can be complicated, especially as there are lots of different types. How do you know which one's right for you? Generally speaking it depends on your circumstances and what you're trying to achieve by buying life insurance. This includes things like what you want and need to leave behind if you die; whether those wants and needs will stay the same or change over time; and how long you want or need to be insured for.

We'll explain more as we detail the different types of life insurance cover you can choose from.


Term life insurance

Term life insurance is an insurance policy that insures you for a set amount of time, known as the policy ‘term’. The policy will pay out a lump sum if you die within your policy term. It won’t pay out if you die after that time as you’ll no longer be insured.

The good thing about term life cover is that it’s often highly affordable. It tends to be cheaper than other kinds of cover – for instance, policies that insure you for as long as you live, however long that may be (like whole-of-life or over-50s cover). It's a good option if you only need insurance for a certain period of time. People often choose this kind of cover if they have financial liabilities they know will eventually go away, like paying for a mortgage or having financially dependent children.

Not only is term life cover a good way of protecting yourself just for the time that you need cover (so you’re not insured for any longer than you need to be) – but it’s also a good way of protecting yourself according to how your needs do (or don’t) change during that time. This is because you can either buy ‘decreasing’ or ‘level’ term life cover.

Decreasing term insurance

  • Pays out a lump sum if you die
  • Covers you for a fixed policy term (e.g. 10, 20 or 30 years)
  • The lump sum amount decreases over time
  • Often cheaper than level term insurance

In a decreasing term life insurance policy, the lump sum of money paid out if you die during your policy term decreases over time. So, if you die early in your policy term, your family would receive a bigger lump sum than if you died nearer the end of it.

This kind of policy is suitable if the things you’d need the money for also reduce with time – a mortgage being the most obvious example. The money needed to pay off your mortgage if you died would be more in 5 years’ time than it would be in 20 years’ time, for example. The cost of raising your children is another good example; the younger they are, the more money would be needed to raise them, and vice versa.

Level term insurance

  • Pays out a lump sum if you die
  • Covers you for a fixed policy term (e.g. 10, 20 or 30 years)
  • The lump sum amount paid out always stays the same
  • Usually more expensive than decreasing term insurance, but cheaper than whole-of-life cover

In a level term life insurance policy, the lump sum of money paid out if you die during your policy term always stays the same. So, if you die early in your policy term, your family would receive the same lump sum as if you died nearer the end of it.

This kind of policy is suitable if you know your life insurance needs will always stay the same. In other words, the amount of money you’d need to pay off debts and/or support your loved ones financially would be the same in 5 years’ time as it would be in 20 years’ time. Or, you might choose this kind of policy simply because you want to leave a set amount of money to your loved ones if you die at any point during your policy term.

Find out what type of life insurance you need
Start here

Whole-of-life insurance

  • Pays out a lump sum if you die
  • Covers you for the whole of your life (however long you live)
  • Usually more expensive than term life insurance

This kind of cover does what it says on the tin: insures you for the whole of your life. It guarantees that your partner or family will receive a lump when you die, whenever that happens – as opposed to term life insurance, which only pays out if you die within the agreed policy term. For this reason, whole of life cover is more expensive.

For many people, term life cover does what they need it to: insures them for the time in their life that their family would need financial support. The logic being that, after that time, they’d be able to cope financially without you anyway (because debts have been paid off, children have grown up, and they’re generally more financially comfortable). People typically take out whole of life cover if they have liabilities that will never go away – like the cost of their funeral or inheritance tax.


Over-50s life insurance

  • Pays out a lump sum if you die
  • Covers you for the rest of your life
  • Often more expensive than term life insurance

Life insurance gets more expensive as you get older, as insurers deem you gradually higher risk to insure (because, put simply: the older you are, the more likely you are to develop a health condition or die). This can make normal life insurance difficult to get for people over the age of 50, especially if you already have a health condition.

Over-50s insurance is an alternative way of insuring your life for people of that age group. It works like a whole-of-life policy – insuring you for the rest of your life, until you die – and is different to other types of insurance because it doesn’t require any medical underwriting. For this reason, over-50s cover will be more expensive than term life cover, for example – but if you’re over the age of 50 and trying to take out a new life insurance policy, it might be your only option, especially if you already have a health condition.


Family income benefit

  • Pays out a monthly amount if you die
  • Covers you for a fixed policy term (e.g. 10, 20 or 30 years)
  • Can be a similar price to term life insurance

Family income benefit is a type of life insurance designed with families in mind. The main difference between this and other types of life insurance cover is that instead of paying out a lump sum if you die, it pays out a monthly amount. The idea being that if you have a family, this would better help them cover the monthly expenses they’d still have if you were no longer around. You choose how much that monthly amount will be when you take out the policy (the higher the amount, the more expensive your insurance premiums will be).

If you die during your family income benefit policy term, your family will receive monthly payments for the rest of the term. Bear in mind that the number of payments they receive depends on if and when you die. If you died early in your policy term, they’d receive more monthly payments than if you died later in your policy term. And if you don’t die during your policy term, the policy ends and you’re no longer insured.


  • Term life insurance covers you for a fixed amount of term – e.g. 10, 20 or 30 years
  • Decreasing term life insurance will pay out gradually less over time if you die during the policy term
  • Level term life insurance will always pay out the same if you die during the policy term
  • Whole-of-life insurance covers you for the rest of your life and always pays out the same amount, whenever you die
  • Over-50s life insurance covers you for the rest of your life, always pays out the same amount, and doesn’t require medical underwriting
  • Family income benefit insurance covers you for a fixed amount of time and, if you die in that time, pays out a monthly amount (not a lump sum) for the rest of your policy term
What is life insurance?
An insurance policy that pays out a tax-free lump sum to your partner or family if you die. It’s designed to make sure your loved ones would be financially secure without you and your income.
Who needs life insurance?
Anyone who has financial dependents. In other words: other people who rely on your income. If you have a partner or children who’d be financially affected by you dying, you should consider having some life insurance in place.
How much does life insurance cost?
Life insurance is often very affordable, but the cost will be different per person. This is because it depends on the cover you buy and how much of a risk you are to insure (based on your age, health and lifestyle). Generally speaking, it's cheapest when you’re young, fit and healthy.
Does life insurance always pay out?
Life insurance will pay out if you die while you’re insured and you were honest about your health when you applied. It won’t pay out if you die after your policy runs out or you cancel it – and might not if you meet an exclusion (e.g. many insurers exclude death by suicide within the first year).
Is it easy to claim?
Claiming on a life insurance policy is straightforward – your partner or family simply claim directly with your insurance company. Making sure they know about your policy and have the details in case the worst happens can be helpful.

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