Life Insurance UK: Types, Costs and How to Choose Cover
UK insurers paid out £7.84 billion in protection claims during 2025, about £21.5 million every day, according to the ABI and GRiD. Yet the FCA’s Financial Lives 2024 survey found only 28% of UK adults hold a policy.
The money is being paid. Most households just aren’t in line for it.
How cover works
You pick a sum assured and a term, then pay a monthly premium. If you die within the term, your chosen beneficiaries receive a lump sum. Most policies also include terminal illness cover. Life insurance UK plans start from around £5 a month.
Main types
Level term: fixed payout for the whole term
Decreasing term: falls with your repayment mortgage, so pair it with mortgage protection
Family income benefit: tax-free monthly income instead of a lump sum
Whole of life cover: pays whenever you die
Over 50s plan: guaranteed acceptance, smaller payout
What sets your price
Age, health, smoking status, cover amount and term length drive the premium. Use the guide on how much cover you need to size your policy.
Tax and claims
Payouts are usually free of income tax, though they can count towards your estate for inheritance tax unless written in trust. In 2025, insurers paid 96.7% of new life insurance claims. Answer every application question honestly, because non-disclosure is a common reason for rejected claims.
Get advice
FCA-authorised advisers compare the whole market, and the advice is fee-free. You can get a quote or review an existing policy.
General information only, not personal financial advice. Consult an FCA-authorised adviser before deciding.
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