How long should I take out life insurance for?

7 min Read Published: 08 Dec 2023
What is the best length for your life insurance policy?
What is the best length for your life insurance policy?

In this article, we explain what life insurance is, whether it is right for you and how long you should take out life insurance. We would recommend that you read the whole article, as we go on to explain how to obtain the best value life insurance quotes including how to get up to £100 cashback.

What is the best length of life insurance policy?

The length of your life insurance policy will be personal to you and should be based on the reason you need life cover. Working out the number of years - referred to as 'the term' - that you buy your life insurance for can be confusing but understanding your reason for the insurance will help.

1 minute summary - How long should I take out life insurance for?

  • The length of your life insurance is determined by whether it is for your family, mortgage, funeral costs or to fund Inheritance Tax
  • Term life insurance is usually bought for between 25 and 40 years and is most common for families and people protecting a mortgage debt
  • Funeral costs and Inheritance tax funding will mostly require a whole life insurance
  • Taking cover for longer than you need can provide greater flexibility than short-term cover that you have to renew
  • It is best to talk through costs and options before buying your life insurance – you will also receive £100 cashback*

How long should I have life insurance for my mortgage?

If you have a mortgage and were to die before it was paid off, it is likely that those you leave behind may struggle to keep up with the mortgage payments. In this scenario, you need to ensure that the term of the mortgage is covered. So, the number of years that your life insurance policy covers you match the number of years until your mortgage is paid off. If you're planning to pay your mortgage off early, you should still consider buying life insurance for the full term and simply cancel it once the mortgage is paid off. This ensures that your life insurance won't run out too early if repaying your mortgage early does not go as planned.

How long should I have life insurance for my family?

If you have children, you should take the policy over a time period that will ensure your family will be taken care of and the children are grown up and able to financially support themselves. Life insurance will protect the living expenses for your household but is more expensive the longer you take it, so you should only take it for as long as you need it. However, do remember to factor in any planned children so that your life insurance covers your youngest child until they are independent.

If you are in any doubt, we would recommend that you take advice, as it is free and gives you peace of mind that you are buying the right cover. It's also important to make sure you choose the correct term for any life insurance policy. We've partnered with a protection specialist that can help you (plus we have personally vetted their service).

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What is life insurance?

There are a few different types of life insurance which we go on to talk about in more detail below, but broadly speaking, the term “life insurance” refers to a policy that is typically taken out over a fixed term and if the person dies within that term, the policy pays out. Most policies will run for a term of between 5 and 25 years (although this could be longer) and if the policyholder dies within that term, the insurance company will pay out the amount that was agreed at the start of the policy term (the sum assured).

What types of life insurance are there?

There are various different types of term life insurance including

Life insurance policies that don't have a term or set period of cover include:

Level term life insurance

The amount you are insured for remains the same throughout the policy term (It neither increases or decreases) This is good should you want to know exactly how much will be paid out upon your death.

Decreasing term life insurance

The potential payout decreases throughout the policy term, either in equal instalments or more often in line with debt, like a loan, credit card or mortgage. This is a popular option for those who want to cover a repayment mortgage in the event of death, as it is cheaper than Level Term cover and guarantees that the mortgage will be cleared in full should you die.

Family Income Benefit

This is a type of decreasing term cover that is designed to pay an annual or monthly amount should you die within the policy term. You can choose the amount of cover that you wish to be paid out should you die, and upon death, it would continue to pay out for the remaining term of the policy. This is cheaper than Level term cover as the longer you live, the less money can be paid out.

Increasing term life insurance (often referred to as index-linked term life insurance)

The amount you are insured for increases over time to keep pace with inflation. You can choose to increase it by a fixed amount, say 5%, or it can be linked to RPI (The Retail Prices Index). Premiums will usually go up each year by the same percentage plus an additional amount to pay for the increase.

Over 50’s Life Insurance

Over 50s life insurance is a type of life insurance policy for anyone aged over 50 with most policies providing guaranteed acceptance avoiding the need to provide any medical information. Premiums are paid monthly or annually and so long as premiums are kept up to date, the policy is guaranteed to pay out should you die. The amount of cover is usually limited to much less than other types of life insurance as this type of life insurance is largely used to cover funeral costs.

Whole of life insurance

Whole of life cover guarantees that the insurer will pay out a lump sum whenever you die rather than within a specified time frame. This policy can be quite expensive as you will need to ensure that you continue paying premiums right up to your eventual death. If you stop paying your premiums at any point, the policy stops and you lose the money you have paid in. Another commonly used name for this type of policy is Whole of life assurance.

Do I need life insurance?

The question you need to ask yourself is that in the event of your death, will someone be financially worse off as a result? Do people rely on your financial support? Do they rely on your income? Do you provide care for children or other dependents in your life that would otherwise have to be paid for? Have you got debts, such as a loan or mortgage? If your children, partner or other family members rely on you financially or if you have debts, then it is likely that your family will benefit from you having life insurance arrangements in place. Essentially life insurance provides financial protection against death and provides the insured person with peace of mind that should they die, their financial affairs can be looked after using the payout money.

Buying life insurance to pay for specific things like paying off a mortgage or debts or providing family support needs to be done with consideration. For example, arranging a trust with your life insurance will not only ensure that any claim money reaches those who need it without the delays caused by probate and any reduction in value due to inheritance tax.

If you do not have any debts or dependants and therefore don't require life insurance to cover anything if you die, it may be better to consider income protection or critical illness insurance which are policies designed to pay you in the event of you being unable to work or upon diagnosis of a particular illness, meaning you benefit from the money when you really need it and can continue living a good quality of life.

How much life insurance do I need?

The amount of life insurance cover you need will depend on your own personal circumstances. Things you will need to consider when working out the amount of cover you need are your loans (including your mortgage), the cost of a funeral and crucially the cost of replacing your income for anyone who will continue to need it. You need to consider how many children you have and how old they are in order to work out the approximate amount of income required to maintain their lifestyles. We would recommend that you read our article – ‘How much life insurance do you need'  this will take you through a process to calculate your correct amount of life insurance and we think you will be surprised by just how much you may need.

Once you know how much cover you need, the next thing you need to do is shop around to get the best value life insurance quotes. Often when comparing quotes online, say for car insurance, it is difficult to work out the true cost as insurers will often have different features, such as courtesy cars and differing levels of excess. Life insurance provided by a reputable insurance company, simply put, is the same policy wherever you buy it; so it is, therefore, crucial that you shop around to get the best value life insurance premiums.


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