10 Best Term Life Insurance - level or decreasing companies and policies
According our research, the following life insurance companies and policies are the best for Term Life Insurance:
- Scottish Widows - Protect Personal
- LV= - Flexible Protection Plan
- Nationwide Building Society - Multi Protection
- Legal & General - Level or Decreasing Term Assurance
- Sainsbury's Bank - Level Term Assurance
- Barclays - Mortgage Protection Plan
- Zurich - Life Protection
- AA - Mortgage Protection
- Aviva - Life Insurance
- VitalityLife - Comprehensive
9 Best Whole of Life Insurance companies and policies in the UK
In 2022 these were the top 9 providers of whole of life insurance policies:
- Zurich - Adaptable Life Plan
- Vitality - VitalityLife
- NFU- AIG Whole of Life Insurance
- Royal London - Pegasus Whole of Life Plan
- Legal & General - Whole of Life Protection Plan
- Scottish Widows - Protect Whole of Life Cover
- Aegon - Whole of Life Plan
- AIG Life - Whole of Life Insurance or Care Cover
- LV= - LifeTime+
10 Best Life Insurance policies for people over 50
- Smart Insurance - Smart Guaranteed Life Insurance (Over 30s)
- Legal & General - Over 50s Life Insurance Plan
- Sainsbury's Bank - Over 50s Life Insurance Plan
- AA - Over 50s Life Insurance Plan
- Post Office Money - Over 50s Life Cover
- Sunlife - Guaranteed Over 50 Plan (Capped)
- Royal London - Over 50s Life Cover
- Aviva - Guaranteed Lifelong Protection Plan
- Santander - Over 50'S Life Assurance
- LV= - 50 Plus Plan
Choosing the best life insurance in the UK
To build these lists of the best life insurance policies and companies in the UK, we combined independent reviews from Fairer Finance on each company’s claims, complaints and transparency, alongside a score for how comprehensive each of their policies are. For the over 50s policies, we only looked at the comprehensiveness of each policy, because they are guaranteed to pay out, so an insurer’s claims record is not relevant.
Our aim is to help you identify the best life insurance policy based on quality indicators, not cost.
In another recent article, we’ve also ranked the best health insurance in the UK.
What is life insurance?
A life insurance policy is a contract between you and an insurance company which ensures your family or loved ones are financially secure if you were to die. Having life insurance will give you peace of mind that should the worst happen, your family will be taken care of and not end up financially destitute.
How does life insurance work?
You pay monthly or annual premiums and the insurance company promises to pay out a cash sum if you were to die while the policy is active. That is provided that all of their terms and conditions are met.
Every company and policy provider has its own conditions and indeed exclusions, so it is vital to read the small print of your policy documents. For example, many providers won’t pay out if death occurs due to suicide, a drug overdose or a risky or reckless act. If you have any questions or concerns about the policy you are thinking of taking out, be sure to speak to the insurance company and get clarification.
How much life insurance do I need?
There are a number of key questions you should ask yourself when considering how much life insurance you need.
- How many people are financially dependent on you?
- Do you have a mortgage you need to cover?
- Do you or your family have other debts?
- Do you have any savings your family could use?
- Is there future spending you need to plan for, i.e. education costs for your children?
- What unforeseen costs might arise because of your death?
- What death-in-service benefit does your employer offer if any?
The first question you should ask yourself is who else is financially dependent on you? Do you have a partner or children who rely on your income? Are there other family members who would face financial hardship if you were no longer around to support them?
If you don’t have any dependants, then there may not be a need for you to take out life insurance at all.
Some insurance companies will offer free life insurance to new parents, but this may not be enough to cover all of your costs if the worst happens to you, so it is well worth considering your options if you are expecting a baby.
Death in service and savings
Before you look at how much cover you require it’s important to understand what arrangements you already have in place, such as death in service protection from your employer or indeed your own savings. Even if you don’t have a life insurance policy, you may find that your employer will pay out a cash sum in the event of your untimely death. The value of this lump sum will vary from employer to employer, but often it is around four times your annual salary.
If you don’t have a mortgage or too many dependants, you may find that this cover is actually ample, and you don’t require additional life insurance protection. Just bear in mind that if you change jobs, or become self-employed, you could lose that benefit.
Mortgage and other debts
Often when a policy is configured, you will start with the size of your mortgage and any other debts you have, and look to have those paid off should you die. Generally speaking, debts reduce over time as you pay them off, which is why insurers have created policies such as decreasing term life insurance, which also reduce over time.
How much life insurance cover?
A rule of thumb is to cover 10 times the main breadwinner’s income; this is meant only as a guide though, and everyone’s circumstances will be different. It may sound like a lot of money, but you need to bear in mind that inflation will eat into the value of any payout over time.
The quotes you receive for life insurance will vary dramatically based on the amount of cover you would like. So when you compare life insurance companies and policies it’s vital to always use the same details of how much cover you would like and for how long.
What is the average cost of life insurance?
Life insurance costs around £10 a month on average based on the quotes we received in April 2020, for a 36-year-old, with a clean medical history, who doesn’t smoke and is a light drinker.
The prices you receive will vary based on your own circumstances, such as your age, any pre-existing medical conditions you may have and also whether you smoke.
If you add critical illness cover to the policy it will increase the cost of the policy too, usually by as much as the cost of the original policy.
The good thing with life insurance is that most premiums are fixed and the monthly costs will never increase.
It is always worth shopping around when looking for life insurance as it will likely be a one-time purchase that will stay with you for most of your adult life.
Types of life insurance
There are various types of life insurance and therefore it’s important to not only seek out the cheapest option but also find the type of insurance that is right for you.
Here’s a list of the main types of life insurance, all of which we explore in more detail in this article.
- Level term life insurance
- Decreasing term life insurance
- Over 50s life insurance
- Whole of life insurance
- Funeral cover
- Life insurance with critical illness cover
Most insurers will offer most, if not all, of these types of cover and so you can find out more by visiting their websites or requesting a comparison quote from us using this link. It’s always worth researching the topic and deciding on the type of cover you need before you do comparisons, but if you’re unsure of where to start, simply complete this form and we’ll be in touch to help you.
Term Life Insurance
Term life insurance, whether it’s level term or decreasing, can often offer the best value for those looking for a cheap life insurance policy. Term insurance insures you for the term of the policy, paying out if you die before the policy ends. If you don’t die before the policy ends, the premiums you’ve paid won’t be returned.
There are two main types of term insurance: level term and decreasing term, in the next section we explain the difference.
Level term vs decreasing term life insurance
The key difference between level term and decreasing term life insurance policies is what they pay out if you die while the policy is active.
Level term life insurance
Level term life insurance pays out the same pre-specified cash lump sum if you die, regardless of whether you die at the start or the end of the term of the policy. The cover remains the same throughout the life of the policy and the premiums remain the same too. Level term life insurance is often a good choice for those looking to cover interest only mortgages, that are not covered by an investment vehicle or endowment policy.
UK comparison websites often use level term insurance as the foundation for their quotations, but it’s not always the best route to keep costs down.
Decreasing term life insurance
Decreasing term life insurance is similar to level term inasmuch as the premiums tend to remain the same throughout the term of the policy. However, how it differs is that with decreasing term life insurance, the amount of cover decreases over the term of the policy. Meaning that if you die towards the end of the policy, the cash lump sum will be significantly less than if you were to die at the beginning.
This type of policy is often used to cover debt, such as a repayment mortgage, as the outstanding balance will get smaller over time.
Decreasing term life insurance is an excellent way to get a cheaper policy, assuming you understand that the cover will decrease over time. If you’re looking to get life insurance to cover your mortgage or other debt, this is an excellent choice. As well as providing mortgage cover, this type of policy can also be useful for inheritance tax planning purposes.
How much does level term life insurance cost?
We obtained quotes in April 2020 for a level term policy for a 32-year old, non-smoker, with a clean medical history who is based in London. The prices we received back, ranged from £9.50 per month, up to £17 per month.
As will be the case with any types of insurance, costs can vary significantly based on your own personal circumstance and of course policy choice. It is always worthwhile doing independent research and also speaking to an independent expert, such as our FCA approved advisors, before you buy.
Generally speaking, life insurance costs rise with age, so the younger you are when buying a policy, the cheaper it will usually be across the term. If you suffer from any ill health or are a smoker, you can expect your life insurance premiums to be higher.
The great thing with life insurance is that getting quotes is usually quick and easy, so you can very quickly compare costs and benefits of the various providers. Just be mindful that comparison websites tend to be quite sparse in terms of information, so going direct to the providers or speaking to a life insurance broker are both sensible options.
Over 50s Life Insurance
Over 50s life insurance, also known as “lifelong protection”, is a specific type of policy created for those between 50 and 80 years of age. Rather than the usual health interviews and questions from doctors, everyone between 50 to 80 is guaranteed acceptance. It’s for this reason that over 50s life insurance is also referred to as “no-medical life insurance”.
With over 50s life insurance, premiums are usually fixed and stop at the age of 85 or 90, with cover then continuing for the entirety of the holder’s life.
Something to be careful of is that over 50s life insurance often has a qualifying period, between 12 and 24 months and if you die during this initial period your premiums may be returned without the cash lump sum being paid. Of course, all life insurance companies have their own rules, so be sure to read the small print before committing.
How much is over 50s life insurance?
You can get over 50s life insurance for as little as £7 but bear in mind that you won’t get a huge amount of coverage for that so if you want more cover, you can expect to pay more. While you’re guaranteed to be accepted for “no medical” life insurance, costs can still vary depending on your age and how much cover you need.
Whole of life insurance
Whole of life insurance provides cover for your whole life as the name suggests. As with other insurance, you pay your premium each month and, when you die the policy pays out a lump sum.
With whole of life policies, the insurance company invests your premiums into a life fund that spreads its investment across the stock market, bonds, property and cash. When you die, it then uses that fund to pay your cash lump sum.
Whole of life insurance - pros and cons
The significant benefit of whole of life cover is that you are guaranteed a payout because the policy lasts the entirety of your life.
It’s important to remember though, that your cover is tied to the performance of the insurer’s investments and if that fund performs poorly, you could be asked to increase your premiums, even though you’ll still have the same level of cover.
2016 Cuts to cover
In 2016, the financial ombudsman received thousands of complaints about whole of life insurance policies. Primarily, those complaints were due to companies slashing the levels of cover their schemes offer while asking customers to pay the same premiums. The reason for this is that premiums and sums assured are reviewed after 10, 15 and 20 years.
A lot of customers who had whole of life policies felt they were not properly informed about the reviews and thousands were understandably upset when they received letters informing them about their cuts to cover.
At the time, the Telegraph spoke to one customer, whose life and critical illness cover, was slashed from £113,500 to £36,950, despite paying Sun Life of Canada premiums for over 20 years.
As you can see, it’s incredibly important to understand how life insurance works before you take it out, so make sure you speak to potential insurers and seek out independent advice before committing to a policy.
If you’ve been hit with a reduction to your cover or an increase to your premiums, it may be worth shopping around for another provider to see if you can get better terms.
How much does whole of life insurance cost?
It’s possible to arrange whole of life insurance for as little as £10 per month, but many things, such as your age and medical history will affect the price you pay. If you’re a heavy drinker, smoker or have suffered medical issues in the past, you can expect to pay more than this for your cover.
Essentially, the higher the risk of you dying young, the more expensive cover will be. Women typically pay less as they often live longer.
The total cost of a policy also depends on whether payments stop at a set age or continue indefinitely. If you continue paying until you reach the age of 100, for example, you may find your cover has come at a very high price.
Online price comparison sites don’t always take this into account, so make sure you click through to read the full policy details for each insurance company.
Comparing whole of life with term life insurance policies
The majority of people that pay for life insurance choose either level or decreasing term insurance that runs for a set period of time. Term insurance is usually cheaper than whole of life and most people in their later life have much less need to provide life cover for the ones they love.
The main reason people take out whole of life cover is to help reduce their family’s inheritance tax bill (IHT). If for instance, you take a whole life cover policy, you can write it into trust and your beneficiaries will receive a tax-free cash lump sum that they can use to pay the inheritance tax bill.
Tax planning is a complicated area and we’d always recommend taking specialist advice about how to put life insurance into trust.
Life insurance with critical illness cover
Many people choose to take out critical illness cover at the same time as a life insurance policy. Critical illness pays out a lump sum if you die, become terminally ill, or are diagnosed with a serious illness. As soon as one of these happens, the policy ends and is paid out. Family life insurance with critical illness cover provides this type of protection for multiple people in a family.
What do critical illness policies cover?
Critical illness insurance policies will cover any of 35 specified illnesses and up to 150 for more comprehensive policies. Effectively the more you’re willing to pay, the more illnesses will be covered by the policy.
What is and isn’t covered also varies from provider to provider, so it’s important to look closely at the list of conditions. For example, some providers may not cover forms of cancer which are easily curable. Similarly, mild heart attacks and strokes might not be considered severe enough to justify the policy paying out. Reading the policy small print and exclusions will help you understand what is and isn’t covered.
How much does critical illness cover cost?
Critical illness cover costs will depend on how likely you are to fall ill, alongside how many illnesses you would like cover for. Many providers ask applicants to complete health questionnaires or have a check-up with a doctor before providing a policy. If you want to reduce the cost of your policy you can do so by living a healthier lifestyle. Quitting smoking, reducing your weight and exercising frequently can all bring premiums down.
Key facts about critical illness cover:
- Premiums are usually fixed for the whole term of the policy, but some do have “reviewable” premiums that are re-set regularly.
- There is no cash in value on the policy. If you don’t fall ill and don’t die within the length of the policy you and your loved ones don’t get anything back.
- Critical illness cover is often less expensive when purchased alongside life insurance, but bear in mind that the policy will only pay out once. So if you became seriously ill and subsequently died, you would receive one payout when you’re diagnosed, but your family wouldn’t get anything additional when you pass away.
- It’s very important to be honest when you fill out your forms and questionnaires and complete them accurately and carefully. The better the information your supply, the higher the probability that the policy will pay out in the event of a claim.
- Just like other forms of life insurance, your cover will stop if you don’t keep up with your premiums, so be sure to make it affordable.
10 Best critical illness insurance companies and policies
These are ten of the best critical illness policies based on comprehensiveness and in no particular order.
- Aegon - Personal Protection
- Aviva - Critical Illness +
- Connells - Critical Illness Cover
- Countrywide - Protect+ Critical Illness Cover
- Legal & General - Multi Protection
- Old Mutual Wealth - Protect
- Royal London - Personal Menu Plan
- Scottish Widows - Scottish Widows Protect Personal
- VitalityLife - VitalityLife Primary or Comprehensive Cover
Our own funerals aren’t something we often discuss, but they can be costly, so making some preparations for yours is sensible. Life insurance that specifically covers the cost of your funeral can be a simple way to ensure that there is at least no financially related stress associated with your death.
Here are a few of your options:
Whole of life insurance policies
Whole of life insurance policies are a good option, but bear in mind they can take some time to pay out in the event of your death.
Another option is getting a funeral plan that will cover the cost of your funeral - just be sure to check what it covers and what is and isn’t included.
Pay out of your estate
If you’re planning on your family using your savings to pay for your funeral just make sure the money is held in a joint account that a member of the family has access to.
For more information about funeral plans, check out this useful guide by Bought by Many.
List of UK Life insurance companies:
- Royal London
- Liverpool Victoria (LV)
- Beagle Street
- Post Office
- Scottish Widows
- Friends Life
- Direct Line
- Abbey Life
- Age Concern
- Age UK
- Bank of Ireland
- Direct Life
- Direct Line
- London Life
- Marks & Spencers
- Old Mutual
- One Family
- Police Mutual
- Royal Sun
- Scottish Friendly
- St Andrews
- Sun Alliance
- Unite Union
- Yu Life