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What are the key benefits of life insurance?

4 mins read
by Unbiased Team
Last updated Tuesday, April 9, 2024

Discover the benefits of life insurance and why it's crucial for securing your family's future financial stability.


  • There are two main types of life insurance: term life and whole life.

  • Premiums depend on many factors, such as your age, health, and coverage needs and range from £6 to over £70 per month.

  • Life insurance plays a crucial role in safeguarding your mortgage, and the death benefits are typically tax-free.

  • Unbiased can help you find a qualified insurance broker to navigate your life insurance options and secure the best coverage.

How does life insurance work?

Life insurance operates on a simple yet crucial principle: offering protection for the future.

Simply put, it is a contract between you and an insurer where you pay premiums in exchange for a lump sum payment, known as the death benefit, which is paid to your beneficiaries upon your death. 

What are the different types of life insurance?

Life insurance policies typically fall into two categories: term and whole life insurance.

These different types of life insurance each have their advantages. 

Term life insurance provides coverage for a specific period, usually 10, 20, or 30 years, while whole life insurance offers coverage for your whole life as long as premiums are paid. 

Whole life insurance accumulates cash value over time, which can be accessed during your lifetime through policy loans or withdrawals.

There are two main types of term life insurance: decreasing term and increasing term. 

A decreasing term policy’s payout decreases over time. Typically, this type of policy is chosen to protect a repayment mortgage.

As you pay off your mortgage, the payout amount decreases along with your remaining mortgage balance.

Increasing term insurance payouts gradually grow to adjust for inflation and accommodate your family's increasing financial commitments. 

What is the average life insurance cost in the UK?

According to I Am Insured, the average life insurance cost in the UK is currently around £38 per month.

Many factors determine how risky you are and, therefore, what your premiums will cost, including your age, gender, smoking status, health history, occupation and lifestyle. 

Young and healthy individuals buying term life insurance with minimal coverage may pay as little as £5 per month, while older individuals or those with pre-existing health conditions seeking comprehensive coverage with whole life insurance could pay upwards of £70 per month.

The personal benefits of life insurance 

Life insurance provides personal benefits beyond financial security.

One of the most significant benefits of life insurance is peace of mind, as you’ll know your loved ones will be financially secure in your absence

Life insurance can also be a valuable estate planning tool, helping to minimise taxes and ensuring assets are distributed according to your wishes.

The tax benefits of life insurance 

One of the primary benefits of life insurance is the tax-free death benefit paid to beneficiaries when the policyholder dies.

According to Money Minder, most life insurance policies are excluded from income tax. 

Whole life insurance policies also accumulate cash value on a tax-deferred basis, allowing you to grow your policy's value over time without immediate tax consequences.

The mortgage benefits of life insurance 

Life insurance can play a crucial role in safeguarding your mortgage.

For many homeowners, a mortgage represents one of their most significant financial commitments.

In the unfortunate event of your passing, a life insurance policy will ensure your loved ones can maintain the family home by covering the outstanding mortgage balance. 

The health benefits of life insurance 

Life insurance policies often include health benefits, covering chronic and terminal illnesses.

If you are diagnosed with a qualifying condition, you can access a portion of the death benefit while you are alive.

In this case, the benefits of life insurance are huge, as they can help cover medical expenses and other costs associated with your illness.

Life insurance final expenses benefits

One of the often overlooked benefits of life insurance is its ability to cover final expenses, such as funeral costs and other end-of-life expenses.

Funerals can be expensive, and many families may struggle to cover these costs.

A life insurance policy can help alleviate this burden by providing your loved ones with the funds they need for your funeral and other final expenses.

Do I need life insurance?

Life insurance is essential for anyone who has dependents or financial obligations that would be difficult to meet in the event of their passing.

Life insurance benefits you in many ways: 

  • If you have a family or loved ones who rely on your income to cover expenses, life insurance provides invaluable financial security and peace of mind.

  • Life insurance can be beneficial if you have outstanding debts or a loan that would become a burden for your loved ones to repay.

  • Life insurance can also fund your children's education expenses, ensuring they have access to quality education even if you're not there to provide for them.

Ultimately, life insurance benefits offer protection and peace of mind, ensuring that your loved ones are financially secure no matter what the future holds.

Seek expert financial advice

Whether you want basic cover to protect your family or a comprehensive policy with additional benefits, life insurance can provide financial security and peace of mind for you and your loved ones.

Selecting the best life insurance policy requires careful consideration of your unique circumstances and financial goals. 

Unbiased can match you with an insurance broker who can offer you expert financial advice in navigating the complexities of life insurance.

This will help you make informed decisions to secure the cover you need for a brighter financial future. 

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Unbiased Team
Our team of writers, who have decades of experience writing about personal finance, including investing, retirement and pensions, are here to help you find out what you must know about life’s biggest financial decisions.