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Is life insurance worth it?

We're looking deeper into what life insurance is, how it works and any potential downsides, so you can decide it if it feels worth it for you

A photo of Dom Limberg, the author

By Dom Limberg

Published on: 17 November 2023

8 min read

Is life insurance worth it?

The main question to ask when deciding if life insurance is worth it for you would be what would happen to your family if you died. Trust me, I understand that it’s not a fun thing to think about, but it is important to consider and especially if you have children or other dependents to look after.

It’s sad to hear stories of people losing their home or falling into debt trying to stay afloat following the loss of a loved one. It’s the reality for many people though and is genuinely preventable with the right insurance in place.

Frustratingly there are a lot of myths and mystery surrounding life insurance meaning many people don’t trust it (or insurance companies) and assume it won’t pay out or it’s a waste of money.

The truth is that life insurance generally will pay out and is a popular option which provides peace of mind to literally millions of UK consumers. It’s a cost-effective way to provide your loved ones with financial protection, so they don’t struggle with key expenses like funeral bills or mortgage costs if the worst were to happen.

QUICK SUMMARY – Is life insurance worth it?

Life insurance is a product that can feel really complicated if you’ve never applied for or bought it before. Here, we will look a little deeper into what life insurance is, how it works and any potential downsides, so you can decide it if it feels worth it for you.

  • Many industry experts like Martin Lewis MBE recommend having life insurance if you are a parent, as 23,500 UK children under 18 lose a parent each year (on average)
  • You should seriously consider buying life insurance if your family is likely to lose a significant amount of income and financial support in the event of your death
  • There are a lot of options for life insurance which is great as you have a range of choice, but it can also make it harder to decide which policy is right for you. If you are unsure, it can be helpful to speak to a life insurance specialist for advice.

It’s up to you whether you would class life insurance as ‘really good’, but I’d say these policies are certainly useful to have and can be the main difference between your family struggling or getting by when you are gone.

Most of us avoid the difficult conversations around what would happen if we died, because it can be upsetting or overwhelming. However, it’s so important to have these conversations and put protection in place while we can, so our loved ones have the right support when they need it most.

The main reasons people don’t end up buying life insurance include:

  • Thinking it will cost too much: This can be true if you make the mistake of buying the first life insurance policy you see. The best approach is always going to be to shop around and compare available quotes or speak to an expert who can do this for you.
  • Assuming it won’t pay out: This is a common myth, and it simply isn’t true most of the time. UK insurers publish their claims statistics every year and most insurers report more than 95% claims will be paid out successfully.
  • Can’t get cover due to health: If you have medical conditions, it can make buying life insurance a little more complicated – but not impossible. Your best option would be to speak to a life insurance specialist who understands which providers are best for your specific condition(s).
  • I can just save money instead: This might seem simpler but realistically most people are never going to be able to save as much as life insurance policy could pay out. It’s simply not possible and life insurance could pay out hundreds of thousands of £s that your loved ones would not have otherwise.

Almost anything you buy has the possibility of having a downside to it and life insurance is no exception to this. There are a few things to watch out for when buying life insurance:

1. You could end up paying more than you need to if you don’t speak to the right insurer

This is a big problem for people with medical conditions and high risk jobs in particular. Some insurers may view these factors as too risky and increase prices as a result.

Certain insurers could even choose to decline your application based on these factors, which can feel unfair and off putting when applying again.

I’d always recommend doing some research and thinking carefully about which providers might work best for you. There are a lot of options available though, which is where it can be helpful to speak to a life insurance expert for some guidance.

2. Your policy isn’t necessarily going to be suitable long term

One of our biggest tips would be to regularly review your life insurance policy, particularly if there has been a big change in your life such as buying a home, getting married or having a new child.

All of these things will affect how much cover you need and it’s easy to end up needing much more cover now than you did when you originally bought your policy. Or on the other side of this, you may take out a high level of cover and realise later that it’s way more cover than you really need.

Reviewing your policy allows you to reassess the cover you have and if it still works for you. If you’re not sure whether you need to adjust your policy (or switch to a new one), it can be helpful to talk to a life insurance expert for advice.

3. You can’t find a policy that works for you

In some cases, you might struggle to find a suitable policy or even be declined multiple times due to reasons like your health or job role. This doesn’t have to mean you don’t get covered though, and there are organisations that can help.

The main place to go for help and information would be the British Insurance Broker’s Association or ‘BIBA’. BIBA is an organisation which can help pair you with an insurance broker who will be best suited to finding you the right policy and insurer.

British Insurance Brokers' Association Logo

Contact BIBA

Tel: 0370 950 1790 (Find Insurance)
Tel: 0370 950 1790 (General Enquiries)
Email: info@abi.org.uk

British Insurance Brokers’ Association (BIBA)

The British Insurance Brokers’ Association (BIBA) is a British organisation that covers all insurance brokers in the United Kingdom and their customers. They work hard to ensure there is fair treatment within the insurance industry and they can be a useful resource for insurance information.

If you’re struggling to find the insurance information you need, BIBA can search their members for an insurance broker who could help you.

According to the BIBA website, they receive hundreds of thousands of enquiries about insurance services from consumers every year.

This is known as their ‘Find Insurance’ service and their support is available both online and over the phone, so you can get in touch in the way that best suits you.

This is a very common question and it’s fair to ask whether you are better off putting money into a savings account rather than paying for a life insurance policy.

A lot of consumers assume that savings accounts will be a better option, as you can vary the amounts that you deposit and there is interest applied that will build up. I understand it can be a more tempting option, but it is a riskier choice than buying life insurance for several reasons:

  1. You might die sooner than expected and not have saved much in your account. In comparison, life insurance will always pay out the same set amount even if you die only a few years into your policy.
  2. Something else might come up that you need to use the money for and then your loved ones are left with much less financial security
  3. Life insurance can pay out hundreds of thousands of £s – much more than you are likely to be able to save even if you save for years at a time

Note: Some savings accounts will offer a decent return on investment and whether you buy life insurance or get a savings account will be down to personal choice.

No, life insurance doesn’t work like a savings account or other type of investment. You won’t build up interest on a life insurance policy and in most cases the amount that your insurer would pay out won’t get bigger.

The exception to this is if you choose to buy an increasing life insurance policy. Not everyone is aware of this type of life insurance policy (I certainly wasn’t before working in this industry).

Increasing life insurance is designed to protect your policy against the effects of inflation over time. As prices for products and services in the UK increase, you could find that your life insurance pay out wouldn’t cover the cost of everything that you had hoped it would.

The main things to know about increasing life insurance are:

  • Your policy benefit will increase by a set amount each year (usually a percentage of your original benefit amount e.g. 3%)
  • Be aware that your monthly payments will increase as well when your benefit amount does. Your insurer will get in touch annually to let you know about changes to your policy.
  • Most insurers will allow you to skip the increase on your policy for a year or two, which can be useful if you can’t afford to pay an increased premium for the time being
  • If you do choose not to increase your benefit when asked, there will normally be a limit to how many times you can do this. Many insurers will set a limit where if you choose not to increase for 3 years for example, your policy will switch to level term and you will not be able to apply an increase again.

Buying life insurance is a personal decision and you can choose to buy a policy at any point in your life. It’s not just for younger people either and there are specific over 50s life insurance policies available.

I would say that it is usually best to buy life insurance earlier in life though, as it will generally be cheaper and easier to get.

This is because we’re typically healthier when we are younger which means we are less likely to need to claim on a life insurance policy.

Life insurance is generally a good idea for most people as it can offer peace of mind that your loved ones will be financially secure if you pass away.

This isn’t to say that you definitely should buy a life insurance policy, as this decision is ultimately up to you. I think it is 100% worth considering though, if you have dependents who rely on you financially, a mortgage to repay or potentially both.

If you’re thinking about buying life insurance and you’re not sure if it’s worth it, you should consider:

  • What stage are you at in your life? – Do you have children or a partner who rely on your income? Do you have a mortgage that would still need to be repaid?
  • Would your loved ones be able to pay for your funeral? – Funerals can cost thousands of £s, would your loved ones be able to afford this based on their own income or savings?
  • Estate planning benefits – Life insurance is a simple way to leave an inheritance fo the people you care about with the added bonus of being able to minimise (or avoid) the impact of inheritance taxes
  • Repaying major debts – If you have debts or other commitments, a life insurance pay out can help towards repaying these so your family doesn’t have to cover the cost out of their own income or savings

Life insurance can feel confusing if you haven’t bought it before and it’s sometimes tough to work out which insurer or policy would work best for your own circumstances.

When you’re thinking about getting life insurance, it’s a good idea to think about how much cover you really need, the length of the policy (e.g. 30 years), and whether you want a single or joint policy. Taking the time to consider these factors upfront can make it easier to narrow down your choices and save you time in the long run.

It’s always a good idea to take some time for research and to compare life insurance quotes before making a decision on a new plan. There are a few ways to do this including spending time doing your own research, using a price comparison website or getting some help from a life insurance specialist.

A specialist life insurance advisor will normally be able to compare quotes more quickly to save you time and effort. You can speak to our trusted life insurance partners for free advice here or by calling 0800 009 6559.

If you want to learn more about life insurance, here are some of the most popular life insurance guides on MPO.

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