Working out what life insurance should cost is tricky because it is a balance between having enough cover without breaking the bank to pay for it. In this article, we explain which factors affect the price you pay for life insurance and how to ensure that you are not paying more than you need to.
How much life insurance do I need?
The amount of life insurance you need will vary depending on what the money needs to pay for after death. Although there isn't a hard and fast rule for how you should work out how much life insurance to buy, you should consider the following:
- Loans, credit cards and mortgage - who will pay for these and how much will they be able to manage without your support?
- Dependents - how much will it cost your family to pay for things like the bills, childcare, and other things you provided during your life?
- Funeral - is there quick access to enough money to pay for your funeral given it costs around £4,000 on average?
- Inheritance tax - will the size of your estate mean that inheritance tax will have to be paid and do you want to buy life insurance and put it in trust for your beneficiaries so that they can fund this? (IHT threshold is £325,000 per person in 2024/25)
Debts such as loans, credit cards and mortgages can become a burden for the people left behind if you die. Ensuring that there is enough money to either pay off or reduce debts to a manageable amount can lessen the burden. You can read more in our article, "How much life insurance do you need?".
Trying to cover everything you owe in the event that you die can be expensive. It might be useful therefore to consider prioritising what you need and choosing a smaller amount of insurance that will reduce any debts down to a level that your family could comfortably manage.
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The average price of life insurance
There is no average cost of life insurance because the price for your life insurance is based on you and the amount of cover you want. You can obtain average life insurance quotes using your age, smoker status and by choosing what life cover you want as shown below.
Cost of £250,000 level term life insurance over 20 years for a non-smoker
| Non-smoker aged: | Monthly premium for £250,000 level term assurance over 20 years |
| 25 | £5.82 |
| 35 | £10.37 |
| 45 | £22.09 |
| 55 | £61.27 |
Cost of £250,000 level term life insurance over 20 years for a smoker
| Smoker aged: | Monthly premium for £250,000 level term assurance over 20 years |
| 25 | £9.31 |
| 35 | £19.87 |
| 45 | £53.47 |
| 55 | £154.56 |
How much should I pay for life insurance?
Cautious people might want to have a large amount of life insurance while others might buy the bare minimum in the hope that they'll never need to claim. Life insurance policies are priced based on how much they will need to pay out if you die and how long you want to be covered. Your age, smoker status, health and lifestyle also need to be factored in.
Buying too much life insurance and then having to cancel it because it's no longer affordable defeats the object of buying it in the first place. You will be left without cover and it could put you in a situation where you struggle to get life insurance in the future because your health may have changed. It can be wiser to buy what is easily affordable with a view to buying more as and when you can budget for it. Ultimately, you should pay an amount that is affordable to you.
How different types of life insurance affect what you pay
Term life insurance policies are the cheapest as they cover you for your chosen number of years. Things like covering your mortgage so that it can be repaid or providing an income for your family are time-bound needs (usually linked to the span of your working life) meaning that you won't need to cover them after a certain point in your life. Hence you should choose the number of years for your policy to match this. Choosing a longer term than you need could mean you're paying more than you should.
Decreasing life insurance policies - sometimes referred to as mortgage life insurance policies - can cover a repayment mortgage adequately. Sometimes they are cheaper than a Level term life insurance policy. It is always worth asking for the price for both types of cover so that you can work out which will give you better value for money.
If you require Whole of life insurance you'll need to spend more. A Whole of life insurance policy pays out when you die, whenever that may happen so it costs more than term life insurance. However, you should only really buy this type of life insurance if it's needed. For example, if there will be an inheritance tax liability on your estate when you die and you wish to fund it.
Check how much life insurance should cost for you
It can be difficult to understand how to find the best prices, largely because there are numerous comparison sites and calculators online that promise to give you the best price within a few clicks. Having followed the few clicks, customers find that they have to complete lengthy application forms to receive an offer of life insurance. Sometimes, the offer comes back with a higher price and having gone through the lengthy process, customers often accept these to avoid having to repeat the process. It is a frustrating and inadequate process for buying the right life insurance policy at the best price.
People can feel intimidated when speaking to life insurance agents over the phone, fearing that they'll be upsold or cajoled into buying something that they don't need. For this reason, we vetted the services of a life insurance specialist* that does not do this. Instead, the adviser will take the time to understand what you need and provide solutions based on your budget. The adviser will also be able to explain what your life insurance is likely to cost before they ask you to complete any application forms. They can do this because they predict how your health is likely to impact the cost of your life insurance and are trained to tailor your policy to suit your needs and budget. Additionally, if you buy your life insurance through the specialist life insurer, you will receive up to £100 cashback.
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. The following 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 - LifeSearch
