Do banks offer free life insurance?

7 min Read Published: 09 Feb 2022

Do banks offer free life insurance?No, banks don't generally offer free life insurance to their customers but life insurance is available to buy through most banks. 'Packaged' bank accounts which usually attract a monthly fee often include general insurances such as travel, mobile phone and breakdown insurances, but they rarely include life insurance.

Accidental death cover is often confused with life insurance and we explain the important differences in this article. We also explain what type of life insurance you can buy from your bank and why it is wise to shop around, including how to get £100 cashback when you do.

Accidental death insurance vs Life insurance

Some financial products including bank accounts may include free accidental death cover and it is easy to confuse this benefit with life insurance. Accidental death insurance only pays out if death is caused by an accident and a claim would have to stand up to the scrutiny of whether the death was directly and completely caused by an accident.

On the other hand, life insurance generally pays out for death that occurs due to an accident, illness or natural causes. It is rare that life insurance excludes death caused by any specific means except for suicide which is commonly excluded from claims in the first year or so of a life insurance policy. So, even suicide is covered by life insurance after this initial exclusion policy.

According to the Centre for Disease Control and Prevention, only around 6% of all deaths can be attributed to an accident or unintentional injury. While accidental death cover may sound appealing, it is extremely limited as only around 6% of people who die could legitimately claim on it. Accidental death cover can be a useful benefit during the early stages of a life insurance application and in fact, most life insurance companies use it for this purpose while they check your health and finish the underwriting process.

Bank life insurance

While you can't get life insurance as a free benefit with your bank account, most banks do sell life insurance products to their customers. These include simple term life insurance, decreasing mortgage life insurance and funeral plans which can provide a lump sum of cash to pay for expenses and bills that require settling after someone dies. Some banks include critical illness insurance and income protection cover in their product selections too.

You will, however, find that most banks' life insurance products are provided by a trusted third party insurer such as Scottish Widows or Legal & General. It is the life insurance company that will underwrite and administer the policy and who is ultimately responsible for paying a claim.

Banks rarely sell the best life insurance policies or give you the cheapest monthly payments. This is partly down to the fact that their products don't appear on comparison sites where they would be in competition with similar insurances through other providers. While researching life insurance products offered by many well-known high street banks, we found that you could get a cheaper and better quality version of the policy if you went to the life insurance company directly. You will find more information about this in our article, "Should I take out life insurance with my bank?"

How to buy the best life insurance

Regardless of your reasons for buying life insurance, the quality and cost of the policy will matter hugely. On the face of it, it can seem as though all life insurance policies are equal but there are differences in the terms and conditions and it isn't always clear how this may or may not suit your personal circumstances. Through our extensive research and vast experience working within life insurance businesses, we can tell you that it is best to buy life insurance through a specialist life insurance adviser*.

Often, your personal details like your past and current health, as well as what you do for a living or your hobbies, can change the terms and/or the price of a life insurance policy. Specialist life insurance advisers can pre-empt this and search the whole market for the life cover that best suits you and your budget.

Choosing the right amount and type of life cover to meet your needs is important and a specialist adviser will talk through the factors that will drive this and how you can tailor the cover so you're not paying more than you need to. They'll also provide you with guidance about how to nominate who you want the money to reach and explain ways to ensure that if there's a claim, the money can reach them tax free.

You don't pay for the specialist life insurance adviser's service*, only the monthly payment for your life insurance if you decide to buy it. Additionally, as a Money to the Masses reader, you can get up to £100 cashback if you decide to go ahead.

 

If a link has an * beside it this means that it is an affiliated link. If you go via the link, Money to the Masses may receive a small fee which helps keep Money to the Masses free to use. This link can be used if you do not wish to help Money to the Masses and do not wish to qualify for the cashback referred to in the article