Life insurance, which pays out as a tax-free lump sum, is there to help protect your family financially in case you die. It’s important to get the right level of cover in place, to make sure they’d be sufficiently supported without you – but also to make sure the policy you buy is suitable and and your life insurance premiums are affordable.

Buying cover can be quite tricky because it means confronting a difficult topic, for one, but also working out your future financial liabilities. The policies themselves also come with different features and settings – not to mention the jargon – so it’s natural to have questions you need answered before you get life insurance. What is life insurance? Do I need it? What amount of cover do I need? And so on.

Here are some of the most frequently asked questions we get about life insurance. If you don’t find the answers you’re looking for here, we’ve got lots of other guides (including ones about income protection and critical illness cover) to help you out in our learn centre.

1. Do I need life insurance?

It depends whether you have anyone else relying on you financially. A life insurance policy is ideal if you have loved ones who’d be financially affected by you dying. This can often be the case if you have a partner, especially if you have shared financial commitments, and if you have children.

2. What does life insurance cover?

A life insurance policy covers you if you die while you’re insured. If your policy comes with ‘terminal illness benefit’, it would also pay out early if you were diagnosed with a terminal illness (usually defined as having 12 months or less to live, according to a doctor).

The money paid out in the event of your death or if you’re diagnosed with a terminal illness can be used by your loved ones in whatever way is needed in their circumstances. Often it helps pay off the mortgage, if you have one, and to cover the cost of life moving forward.

3. What is term life insurance?

Term life insurance is a policy that covers you for a fixed amount of time (known as the ‘term’). You choose the policy term when you take out the policy – e.g. 10, 20 or 30 years. Term life cover can either be ‘level’ (meaning it will always pay out the same amount if you die while insured) or decreasing (meaning the amount paid out decreases over time). Buying term life cover is a way of making sure you’re only insured for the amount of time that you have financial liabilities, so you won’t pay premiums for any longer than you need to.

4. Do I need life insurance if I’ve got a mortgage?

Not necessarily. Buying a life insurance policy is often advised when you take out a mortgage, because it’s a big debt to take on, so it makes sense to protect it in case something happens to you. But you only really need this kind of cover if you also have financial dependents – i.e. other people who could be left liable for the debt or without a home if you died.

Without dependents, life insurance might not be the priority protection to get in place, even if you have a mortgage. Not being able to pay the mortgage due to an illness or injury is probably a bigger risk in this scenario, in which case illness cover might be more suitable. Products like critical illness cover or income protection can help you protect your home too.

5. How much will life insurance cost me?

The price of life insurance differs per person, because it depends on several variables all unique to you. This includes your age, health and lifestyle, as well as what level of cover you’re buying, what type of cover, and how long you need to be insured. Generally speaking, life insurance is very affordable – but bear in mind that the price of taking it out will always go up with age, as you become more risky to insure.

6. How can I save money when buying life insurance?

People want good value for money when buying any kind of insurance – but when you take out life insurance, it’s important first and foremost to make sure the cover you buy is sufficient for your needs. There’s no point paying for cover that won’t do what you need it to if you die.

That said, there are many ways to minimise the cost of cover but still be adequately protected – working out how long you really need to be insured to reduce your cover length, for example, or factoring in your partner’s future income to reduce the amount of cover.

7. Can I buy life insurance if I have a medical condition?

You should still be able to take out life insurance even if you have a pre-existing illness or condition – though it depends what it is and how severe it is. It’s very important to disclose any existing health issues when you apply; not doing so could lead to the policy not paying out. Depending on what you disclose, the insurer might accept your application as normal; accept it but charge a higher premium; or postpone or decline it. You might also be required to provide a GP report in order to get covered.

8. How does smoking affect buying life insurance?

If you smoke, you’ll pay a higher monthly amount for a life insurance policy than if you didn’t. Someone of the same profile who doesn’t smoke would be quoted cheaper life insurance premiums. This is because insurers add a ‘loading’ to the monthly price for smokers – to reflect the increased health risks you carry. You’ll only be considered a non-smoker if you’ve not smoked (or used nicotine replacement products) for 12 months.

9. Does life insurance have any exclusions?

Most life insurance policies have set exclusions that apply to anyone who takes out the policy, but your insurer may add exclusions specific to you, depending on what you disclose when you apply. A standard exclusion would be something like suicide; most insurers have a ‘suicide exclusion’ that means the policy won’t pay out if you die in this way within a year of taking out the policy. A specific exclusion would be related to your particular health, occupation or hobbies.

10. Will I be able to change or cancel my life insurance policy?

If you change your mind about a policy you’ve just taken out, you can cancel your life insurance within the 30-day cooling-off period. Otherwise, you can cancel your policy at any point, but you won’t get back any of the money you’ve paid to be insured.

If you’re considering cancelling, it’s important to make sure you’re doing so for the right reasons – as changing your existing policy or taking out an additional policy might be preferable in your circumstances. Many life insurance policies allow you to increase your cover after certain life events – like becoming a parent or taking on a mortgage – but you should look up the specifics in your policy documents.

11. Can I have more than one life insurance policy?

Yes, you can have more than one life insurance policy. If you already have a policy but realise you need more cover as your life has changed, it can sometimes be preferable to take out an additional policy to cover the gap – as opposed to cancelling your existing policy and taking out a new one to cover everything. This is because life insurance gets more expensive as you get older or as your health changes. You might be better off keeping your existing policy, with lower monthly payments, so you’ll only need to cover a smaller amount a new, higher rate.

12. How does a joint life insurance policy work?

A joint life insurance policy is one that covers two people (or two 'lives', as it'll probably be referred to in the policy documents). It will pay out if one of the two people dies. It’s generally designed to cover a couple – so one partner is financially protected if the other dies. Bear in mind that a joint policy usually ends after the first death; after which, the surviving partner would no longer be covered with life insurance. Read more about different types of life insurance.

13. Does life insurance always pay out?

Yes, your 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 term, after cancelling the policy, or after missing payments (in which case, your insurer will cancel the policy). It might not pay out if you meet an exclusion.

14. Who will get my life insurance payout?

It’s usually your partner, children or family who receive the lump sum if you die – but it depends on whether or not you place your life insurance policy in trust. If you do, the lump sum will go to whoever you named beneficiary (or beneficiaries) in the trust arrangement. If you don’t, the lump sum will be counted as part of your estate, and be paid out according to the wishes stated in your will. If you don’t have a will, the payout recipient will be based on the outcome of intestacy. Incidentally, placing life insurance in trust also means it won’t be subject to inheritance tax.

15. Do I get anything back if I don’t claim on my life insurance?

Like any insurance policy, life insurance is there to protect you in case the worst happens – even if you hope it doesn’t. You pay monthly life insurance premiums in return for being insured, but if you don’t die during your policy term, you won’t get any money back. Read more about how a life insurance policy works.

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