What are the benefits of life insurance?

Why life insurance matters

We often protect the things we care about, like our home, car or phone, just in case anything goes wrong. But we don’t always think about protecting the people who matter most.

Life insurance helps take care of your loved ones if you pass away. While it can’t take away the sadness of losing someone close, it can help give your family some financial support during a very difficult time. They might need help paying the rent or mortgage, covering bills and everyday expenses or staying secure in the future, especially if there are children who may need help with education costs.

It also means your family can stay in their home, feel more stable and have time to grieve without added money worries.

People often get life insurance when something big is happening, like buying a home, getting married or having a baby. But you don’t have to wait. You can get life insurance at any age, but it’s usually cheaper when you’re younger.

The key benefits of life insurance

Here are some of the main reasons people choose life insurance:

• It can help give your loved ones financial security
• It can ease the impact of losing a parent or partner
• It can help replace lost income if you’re no longer around
• It can go towards paying off debts, like a mortgage, or covering rent
• Some policies help cover funeral costs
• Some extras, like critical illness cover, can help if you get seriously ill and can’t work
• Most of all, it can give you peace of mind knowing your loved ones are protected

If you’re not sure whether life insurance is right for you, try asking yourself:

• Do you have a partner or children who rely on your income?
• Do you have a mortgage or other debts?
• Would your death leave your family struggling financially?

If you answered yes to any of these, life insurance might be worth thinking about.

Remember, it might not always be easy to save money. Even when we try, unexpected costs, both good and bad, can quickly use up what we've put away. Life insurance could help fill that gap and make sure your family has much-needed support when they need it most.

Read more:

Six reasons you might need life insurance

What do I need when applying for life insurance?

What kinds of life insurance are there?

There are two main types of life insurance: term life insurance and whole of life insurance. Each one works a bit differently, so it’s important to think about what suits your needs best.

Term life insurance

Term life insurance covers you for a set period of time, like 10, 20 or 30 years. If you die during that time, the policy pays out money to your loved ones. If the term ends and you're still alive, the policy stops and there’s no payout.

You can take out another policy when the term ends if you still want cover. Just keep in mind that your monthly payments, or premiums, will likely cost more when you’re older or if your health has changed.

There are three kinds of term life insurance:

• Decreasing term: The payout gets smaller over time, usually in line with your mortgage. It’s often used to help your family pay off the rest of the mortgage if you pass away. It’s sometimes called mortgage life insurance
• Level term: The payout stays the same no matter when you die during the term. You might choose this if you want the money to go toward something specific, like your children’s education or other planned expenses
• Increasing term: The payout goes up over time to help keep up with rising prices (inflation). This can cost a bit more but it helps make sure the money still has the same value in the future

Whole of life insurance

Whole of life insurance covers you for the rest of your life and guarantees a payout when you die.  Post Office Over 50s Life Cover is a type of whole of life insurance that is taken out by people aged 50 to 80.

One of the biggest benefits it that you won’t need a medical exam and you’re guaranteed to be accepted, even if you have health conditions. This could make it a good option if you’ve had trouble getting life insurance before.

But it’s important to know that the payout is usually smaller than with term life insurance.

This type of policy is often used to help with funeral costs or unpaid bills, so your family has less to worry about.

How much am I leaving behind for my loved ones?

Do you know how much your loved ones would get if you were to pass away? Many of us don’t. Getting a life insurance policy or reviewing one you already have can help you understand exactly what they would receive.

Use our free life insurance calculator to help you plan.

Are there other ways to help protect my family?

Yes, life insurance is just one part of a bigger plan. Here are a few other things to think about:

• Death in service: Some employers offer this. If you die while working for them, they pay a lump sum, often three or four times your salary, to someone you choose. If you’re employed, check your contract to see if your employer provides a death-in-service benefit. Or read why life insurance is important if you’re self employed
• Saving and investing: It’s always a good idea to put money aside, if you can. Things like pensions or ISAs (Individual Savings Accounts) can help your money grow over time. Some pensions, like SIPPs (Self-Invested Personal Pensions), even get a bonus from the government
• Trusts: Some people place their life insurance in a trust so the payout doesn’t count as part of their estate. This can help reduce inheritance tax but it’s complex so get independent advice if you’re thinking about this

Planning ahead means looking at all your options, including life insurance, savings, work benefits, and making sure your family will be okay if something happens to you.