What is life insurance?

09 August 2021

Life insurance, which can also be known as life cover or life assurance, is a type of policy that protects your loved ones with financial support if you die. It can help minimise the financial impact that your death could have on your family and offer peace of mind to those you care about most.

Most life insurance policies are designed to pay out a cash sum to your loved ones if you die while covered by the policy. It can help them deal with everyday money worries such as household bills, childcare costs or mortgage payments.

You choose the amount of cover you need and how long you need it for and whether you want joint or single life insurance policies. For more help, take a look at our life insurance calculator or speak to your financial adviser.

Life insurance explained

How would your family copy financially if you weren't around? That's where life insurance could help...

Life insurance explained video

How does life insurance work?

Both types of life insurance that we offer could pay out a cash sum if you die or are diagnosed with a terminal illness while covered by the policy (provided your life expectancy is less than 12 months).

You choose the amount of cover you need and how long you need it for. You can take out life insurance under joint or single names and you can pay your premiums monthly or annually.

Do I need life insurance?

The answer to this depends on your individual circumstances. But if there are people that depend on you financially, such as children or a partner who relies on you financially then life insurance could be a way of helping to protect them.

Ultimately, you should consider whether your family could manage if you were no longer around. How much money would they need to cover childcare costs, household bills and day-to-day living expenses? If you’re retired and your children have long since flown the nest, you may have less need for life insurance, but for new couples, homeowners, young families and those with older children, you should consider getting life insurance.


What does life insurance cover?

Our Decreasing Life Insurance is often used to help protect a repayment mortgage because the amount of cover reduces roughly in line with the way a repayment mortgage decreases.

Whereas our Life Insurance is usually chosen to help financially protect loved ones. The cash sum could be used by your family to help cover everyday living expenses such as household bills, rent or childcare or it could be used to help pay off a mortgage.


Is life insurance only for people with children?

Raising a child is one of the obvious reasons people start to think about life insurance. After all, what is life insurance for if not to protect families? But it’s not the only reason you should think about getting cover. If you live with your partner and they would struggle to pay the mortgage if you were to die, then you should consider life insurance.

It could be used by your loved ones to help pay off a mortgage if you were no longer around, or to help your family with everyday living expenses.

Alternatively, our Decreasing Life Insurance is designed to help protect a repayment mortgage so the amount of cover reduces roughly in line with the way a repayment mortgage decreases.  

Please remember that life insurance is not a savings or investment product and has no cash value unless a valid claim is made.

Find out more about our life insurance products

What types of life insurance are available in the market?

The two main types of life insurance are term life insurance and whole of life insurance. When you take out term life insurance, there is usually a maximum term you can apply for, and could pay out a cash sum if you die during that period of cover. This is the type of life insurance that we can offer without advice and you can choose between Life Insurance or Decreasing Life Insurance.

The difference with whole of life insurance, sometimes called whole-of-life assurance, is that cover lasts for the whole of your life so the cash sum from a valid claim will be paid whenever you pass away, rather than during a specific period of cover.

Read our life  insurance FAQs for more information.