Life insurance: Do you need it? And what benefits does it bring?

Life insurance: Do you need it? And what benefits does it bring?

“Chris died four years ago,” his wife Kay* says. “It was a normal day, we got up, it was bright and sunny and we were working in the garden and suddenly he was taken very ill. Within half an hour, he had passed away.”

But because Chris had life insurance, the payout enabled Kay to pay off their mortgage, go part time and spend more time with their eight-year-old daughter, Ellie. 

“You don’t think losing a loved one will happen to you,” Kay adds. “But unfortunately, it’s a reality and all you want is for your family to be safe and secure.”

We know life insurance isn’t an easy subject to talk about. But it’s an important topic that’s worth giving some serious thought to.


But first: what’s life insurance?

Life insurance (which sometimes goes by the name of life cover or life assurance) is a type of policy that protects your loved ones with financial support when you die.

Whether it’s household bills, childcare costs, mortgage payments, living expenses or funeral costs — policies differ from provider to provider — but put simply, most life insurances pay out a lump sum or regular cash installments to your loved ones after you have passed away.


How does this differ from critical illness insurance?

Critical illness cover is an insurance policy designed to pay out a tax-free lump sum if you are diagnosed with a specified illness. 

This one-off payment could help pay for your mortgage, rent, debt or alterations to your home, such as wheelchair access, should you need it.


What are the three main types of life insurance?

  • Whole of life insurance — this policy lasts for the policyholder’s lifetime. If the policyholder dies, this cover pays a lump sum to your family or beneficiaries.
  • Level term — this policy lasts for a set time. Most people tend to match this to their mortgage term. 
  • Decreasing term — this policy cover decreases over the life of the policy at a predetermined rate.

How much life insurance do I need?

Well, just like a mortgage, there’s no cookie-cutter approach. As Jo Jingree, mortgage adviser explains: “Life insurance is calculated against various personal factors.” 

For example, this can include your family setup, whether you have a partner or children, how much mortgage you have left, and if the worst was to happen, whether you’d want your life insurance to cover the cost of your mortgage, or whether you would want it to cover all the above and more. 

“Then there’s the type of payout to consider,” Jo says. For example, would you want your beneficiary to receive a lump-sum payment or in installments? 

So, as you can see, life insurance is personal and it’s reviewed to suit you and your circumstances.


The benefits of life insurance


  • Payout rates are high

Contrary to popular belief, payout rates for life insurance are really high. In fact, insurance giants Aviva and Royal London paid out 99.4% of all life insurance claims in 2022, while Vitality paid out 99.8% and Zurich settled 98%.

  • You’ll get peace of mind

Essentially, life insurance helps to protect your loved one’s future. It gives you peace of mind knowing that if the worst was to happen, the people you love don’t have to worry about finances. “And I think that’s a price worth paying,” Jo adds. “Especially if you have a mortgage, household bills to pay and dependants.”

  • Many life insurances come with ‘added-value’

Most life and critical illness policies don’t just pay out should the unthinkable happen. They can come with other benefits you can use from the moment you sign on the dotted line. “So, the policy is much more than just a piece of paper you put in a drawer or file away in the cloud and hope to never use,” Jo says. 

Benefits vary, but most life insurances can offer:

  • 24/7 virtual GP service
  • A health MOT
  • Access to specialist nurses
  • Mental health support
  • Expert second medical opinion services
  • Nutritional and wellbeing advice 


Do you need life insurance if you have a mortgage?


There’s no legal requirement to take out life insurance if you have a mortgage. But if you’re unsure how your loved ones would cover the cost of your mortgage if you were to pass, it’s really worth considering. 


Now for the good news

At Mortgage Confidence we don’t charge a fee for arranging protection insurance. So if you’d like some expert advice on how to best protect you (and your family), whether it’s life insurance, critical illness insurance or income protection — reach out

Jo has more than 20 years’ experience in the field so can help you secure that peace of mind by assessing your insurance needs and finding you the most suitable policy to suit your circumstances and your budget, with regular reviews built into our service to ensure your cover stays relevant to your circumstances.


Please note: there may be a fee for mortgage advice. The precise amount will depend upon your circumstances, but we estimate it will be £399. Your home may be repossessed if you do not keep up repayments on your mortgage.


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