Life insurance is one of those things many people know they should think about — and keep putting off. This guide explains what it is, who actually needs it, and the main choices you will face, so you can decide with confidence.
What is life insurance?
Life insurance is a contract with an insurer: you pay regular premiums, and if you die while the policy is active, the insurer pays a sum of money — the death benefit — to the people you have named as beneficiaries. Some policies also pay out if you are diagnosed with a specified terminal illness. The money can be used for anything: covering living costs, paying off a mortgage, or funding children’s education.
Who needs it?
Life insurance matters most when other people depend on your income or would face costs because of your death. You may want cover if:
- You have a partner, children, or other dependants who rely on your earnings.
- You share debts — such as a mortgage — that someone else would struggle to pay alone.
- You would want to leave money to cover funeral costs or other final expenses.
If nobody depends on your income and you have no significant shared debts, you may need little or no cover. A single person with no dependants, for example, often has less use for it than a parent of young children.
The two main types of policy
Term life insurance covers you for a set period — say 20 or 30 years. If you die during the term, it pays out; if you outlive it, it ends with no payout. Term cover is usually the most affordable way to get a large amount of protection, and it suits needs that are temporary, like covering the years until children are grown.
Permanent (whole of life) insurance covers you for your entire life and typically builds a small cash value over time. It costs considerably more than term cover. For most families whose main need is income protection, term insurance is the simpler and cheaper fit — but everyone’s situation differs.
How much cover do you need?
There is no magic number, but a sensible starting point is to add up the financial gap your death would leave: outstanding debts, several years of living costs for your dependants, future expenses like education — then subtract existing savings and any cover you already have. Online calculators can help you work through the figures, but treat their answers as rough guides rather than gospel.
Tips for buying
- Buy for need, not for sales pressure. Work out your number first, then shop.
- Compare policies properly. Look at exclusions, waiting periods, and whether premiums are fixed or can rise.
- Answer health questions honestly. Inaccurate answers can give the insurer grounds to refuse a claim later.
- Name your beneficiaries clearly and review them after major life events.
- Revisit your cover when your circumstances change — marriage, children, a new mortgage, or divorce can all change what you need.
Life insurance is not about you — it is about the people who would manage without you. A little thought now can spare them serious financial strain later.
This article is for general information only and is not financial advice.