Life insurance is one of those things many of us know we should probably have, but keep putting off. It involves thinking about something none of us particularly want to think about. But getting the right cover in place can make a real difference to the people who matter most to you.

Here’s a clear, straightforward look at how life insurance works and whether it might be right for you.

What Is Life Insurance?

Life insurance pays out a lump sum – or in some cases a regular income – if you die during the term of the policy. The money goes to whoever you’ve named as a beneficiary, usually a partner, children, or other close family members.

The idea is simple. If your income were suddenly removed, life insurance helps ensure that the people depending on you aren’t left in financial difficulty.

Who Should Consider Life Insurance?

It’s most commonly associated with people who have a mortgage or financial dependants – and with good reason. If you have a partner who relies partly on your income, children, or anyone else who would struggle financially if you were no longer around, life insurance is worth serious consideration.

It’s also worth thinking about if you’re self-employed. Unlike employees, you won’t have a death-in-service benefit through an employer, so putting something in place yourself is particularly important.

Types of Life Insurance

There are a few different types, and the right one depends on what you’re trying to protect:

• Level term insurance – pays out a fixed lump sum if you die within the policy term. The payout stays the same throughout.
• Decreasing term insurance – the payout reduces over time, usually in line with a repayment mortgage. Often used specifically to cover a mortgage debt.
• Whole of life insurance – no fixed end date. Pays out whenever you die, which makes it more expensive but can be useful for estate planning purposes.
• Family income benefit – instead of a lump sum, this pays a regular monthly income to your family for the remainder of the policy term. Some people find this easier to plan around.

How Much Cover Do You Need?

There’s no single right answer, because it depends entirely on your circumstances. Some people focus on covering the mortgage. Others want to replace their income for a number of years, or ensure school fees or childcare costs are covered.

A useful starting point is to think about the financial commitments and dependants you have, and what it would cost to maintain their current quality of life – or at least give them time and stability to adjust.

What Affects the Cost?

Life insurance premiums are based on a few key factors. Your age is one of the biggest – the younger and healthier you are, the less you’ll typically pay. Smokers generally pay more than non-smokers. Your health history and family medical history can also be taken into account.

The amount of cover you want, the length of the policy, and the type of product will also affect the premium. Some policies have additional features, such as the option to increase cover following a life event like having a child or taking on a larger mortgage.

What About Pre-existing Conditions?

Having a pre-existing health condition doesn’t necessarily mean you can’t get life insurance. Some conditions may result in a higher premium or an exclusion on your policy, while others may have little to no impact at all. It’s always better to be open about your health history – failing to disclose something could mean a claim is refused later on.

A protection adviser can help you find insurers whose underwriting criteria are the best fit for your specific circumstances.

What Happens If You Don’t Make a Claim?

Unlike some financial products, a term life insurance policy has no cash-in value. If you reach the end of the policy without making a claim, the cover simply expires. That might feel like money not well spent – but it means nothing terrible happened, which is rather the point.

Getting the Right Advice

Life insurance isn’t something to buy in a hurry or based solely on price. The cheapest policy isn’t always the most suitable one, and the difference in cost between a basic policy and one that’s properly tailored to your needs is often smaller than people expect.

At Riviera Mortgages, we advise on life insurance and personal protection alongside mortgages. We take the time to understand what you’re protecting and why, and we’ll recommend something that genuinely fits your situation. If you’d like to find out more, we’re always happy to have an honest conversation.