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Find the peace of mind you need

Life is complicated and can be unpredictable. If you want to make sure your family will be looked after if you were no longer around to help them, consider taking out life insurance.

It’s a way of giving you peace of mind. You pay into a policy, and this will pay out a sum of money to a chosen person or people if something unfortunate, such as death or a critical illness, happens to you.

There are many different types of life insurance policy to match different needs. Use this easy-to-understand guide to help you decide which best suits you.

Different types of life insurance explained

Select a type of life insurance to find out more about how it works and how it can help.

  • Term life insurance
  • Whole of life insurance
  • Joint life insurance
  • Critical illness cover
  • Terminal illness cover
  • Children’s cover

Term life insurance

Term life insurance covers you for an agreed period, for example 30 years. This is the ‘term’ of the policy.

This type of insurance is often taken out to cover a loan, like a mortgage, or an ongoing financial obligation, like raising children. It can even be used to cover the costs of a funeral. So, if you have 20 years left to pay on your mortgage, you can take out a term life policy that will cover you for this period.

Term life insurance explained

There are three different kinds of term life insurance policy, and it’s important to understand the distinction between them.

Decreasing term life cover

Decreasing term life cover means the amount your insurer pays out will decrease over time. This is used when a debt, loan repayment or mortgage will also reduce over time.

Decreasing term life cover explained

Level term life cover

With level term life cover, as the name suggests, your dependents will get the same amount no matter when they need to claim.

Level term life cover explained

Increasing term life cover

Increasing term life cover means your insurer will pay out more over time. It’s usually for people whose families may need more help as the years go by – for instance, if you have young children. The increase can either be index linked (in line with inflation) or a fixed rate. The benefit of fixed rate is that, if kept long enough, it may rise faster than the rate of inflation. 

Increasing term life cover explained

Whole of life insurance

This type of insurance covers you for the whole of your life, rather than a fixed period. You pay into a policy, and the insurer agrees to pay your loved ones in the event of your death, no matter when that might be. It’s a good kind of policy to have if you want worry-free cover, without the hassle of taking out a new policy each time a policy term expires.

Whole of life insurance (sometimes called ‘life assurance') is usually significantly more expensive than term life insurance for the same size of payout, and normally has functions besides insurance. For instance, you may be able to borrow against the value of your whole of life insurance, which is one reason for the inflated cost.

Certain whole of life policies are designed to be cheaper than term life. This is because they cover shorter periods for smaller payouts and don't come with extra options such as borrowing against the value of the policy. An example of this type of policy is the Post Office Over 50s Life Cover, which guarantees acceptance for UK residents aged between 50 and 80.

Read about life insurance vs life assurance

Joint life insurance

If you have a partner and want to make sure that your other half, and children, will be looked after if one of you should die, then a joint life insurance policy could be right for you.

It insures two people at the same time and pays out if one of you passes away. It can make life easier knowing you’re both covered. But remember that, in most joint life policies, once you make a claim, the partner who’s left won’t be covered any more. They’ll need to take out their own individual policy after that.

Post Office offers joint life policies that protect two people under one policy with one monthly premium payment. These policies only pay out once if a policyholder dies within the term. Two single policies protect each policyholder separately but will mean paying two premiums each month.

Critical illness cover

Critical illness cover usually pays out a lump sum if you fall seriously ill. It’s a useful way to help towards your expenses if you’re too ill or you’d struggle to meet bills like medical expenses, or any modifications needed to your home.

The payout will either be a percentage of the overall payout or a defined lump sum. This will differ by insurer. And critical illness cover can’t normally be added to an existing policy but must be bought at the point the policy is taken out.

It’s important to make sure you know what critical illnesses are covered by your policy, and what length of time it covers.

Critical illness cover explained

Terminal illness cover

Terminal illness cover will pay your family a lump sum if you’ve been diagnosed with an illness from which you will die in the next twelve months.

At what may be a devastating time for you and your family, having terminal illness cover can help you all by easing your financial worries.

Terminal illness cover explained

Children's cover

Children's cover pays out if an insured child falls seriously ill, usually with a single lump sum payment. It can help towards your expenses if your insured child is too ill or you’d struggle to meet bills like medical expenses or any modifications needed to your home.

The payout will either be a percentage of the overall payout or a defined lump sum. This will differ by insurer, and children’s cover can’t normally be added to an existing policy but must be bought at the point the policy is taken out.

It’s important to make sure you know what is covered by your policy, and what length of time it covers.

Children's cover explained

Choosing life insurance

What type of life insurance do I need?

The right insurance for you depends on your circumstances, what you would like your payout to cover, how much life cover you need, and over what period.

The length (or 'life') of the policy might be a consideration. If you expect that your mortgage has, for example, 20 years to run, you might want a decreasing term policy that runs for this length of time.

Or you might be entering old age and want to set something aside for your children or grandchildren. In this case, you might be more tempted by an Over 50s policy rather than one with a lifespan of pre-determined length.

Your personal financial circumstances could also play a prominent role in choosing life insurance. Your employer might offer death in service, which can supplement the value of a life insurance policy. Or you might know that you are only able to responsibly commit a certain amount each month to a life policy, which can affect the size of a payout.

And you might simply know you want a policy payout of a certain size. In this scenario, you can look at which types of policy are going to offer this and what conditions might apply. Remember, payouts can be subject to inheritance tax.

Post Office life cover options

  • Life Insurance

    Choose between level, decreasing or increasing term insurance, each designed to offer you peace of mind based on your circumstances.

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  • Over 50s Life Cover

    If you're aged between 50 and 80, we could help you leave a cash sum for your family or towards your funeral costs.

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Need some help?

Life Cover help and support

To make a claim, find answers to common questions, access bereavement and wellbeing support or contact us for something else: 

Visit our Life Cover support page