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What is Life Insurance?

Stepping into your new home or holding your new born baby are joyful experiences. However, both of these life developments also come with a certain amount of pressure. If the worst happened and you or your partner passed away, who would pay for the mortgage? Would your family be able to cope financially with the loss of your income or the costs associated with what you provide such as childcare and managing the home? This is where life insurance comes in, but what is life insurance and how can it help?

First and foremost, life insurance offers peace of mind. In the event of your death, your dependants will receive a lump sum, allowing them to pay off debts, such as your mortgage and plan for the future.

In this guide, we'll answer the key question "what is life insurance," along with many other queries, to help you make an informed decision about your life insurance quote.


Do I need life insurance?

Whether you need life insurance or not will depend on your circumstances. If you are single and have no dependants then it's likely to be an unnecessary expense. However, if you are supporting people financially, have a mortgage or other debts then it is something that you should seriously consider.

People who commonly require life insurance include sole breadwinners (those who are the only earners for their family), stay-at-home parents (whose death could result in paid childcare being needed) and single parents. If you are a couple and you both work, you may still need life insurance if either of your salaries could not independently financially support your household.

Visit our Do I Need Life Insurance page to find out more.


What types of life insurance are available to me?

There are a number of different types of life insurance and the best one for you will depend on your particular circumstances. At Compare Cover, you can get quotations and purchase the following types of cover:

Level term life insurance - An agreed sum is paid out in the event of your death during a chosen period/policy term. Find out more on our Level Term Life Insurance page.

Mortgage protection life insurance - This is also known as decreasing term life insurance, in which the amount of cover decreases in line with a standard repayment mortgage. Find out more on our Mortgage Protection Insurance page.

Critical illness cover - This can be purchased alongside or integrated into level term life insurance or mortgage protection insurance, and will pay out if you're diagnosed with a specified critical illness during the term of the policy. Find out more on our What is Critical Illness Cover page.

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How much life insurance cover do I need?

How much cover you need will depend on your specific circumstances. However, without enough research it can be difficult to know where to start.

There's no one-size-fits-all solution and ultimately it depends on what you need the policy to cover. As well as considering what you want to cover, you need to ensure the policy is affordable.

At Compare Cover we will provide you with an indication of what the most common chosen levels of cover are, taken from an average across our customers. We also provide you with a calculator to help you consider your requirements, press the button below to go there now.


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What is covered?

Life insurance policies will pay out in the event of your death. Should you require a policy that pays out should you become seriously ill, critical illness cover can be added on to your life insurance policy as an additional benefit.

The majority of policies will also contain things that they won't cover - also known as life insurance policy exclusions - so it's important to read the policy details.

In some cases insurers may increase your premiums, make a specific exclusion to your policy or decline to offer you cover if you have a serious illness. Lifestyle factors such as being a smoker, excessive alcohol consumption or regularly engaging in dangerous pastimes such as extreme sports may also affect your premium or cover offered. It's important that you fully disclose all material facts to your insurer and truthfully answer all the questions they ask. If you hold anything back they will be within their rights to cancel your policy or not pay out in the event of a claim.


Is there a difference between life insurance and life assurance?

Historically the term 'life assurance' referred to policies that covered an individual for the whole of their life - they were 'assured' of receiving a payout. However, today the terms are often used interchangeably.

Life insurance usually refers to term life insurance, which will cover you for an agreed time period - usually between 5 and 30 years - which you can decide at the outset of the policy. The policy will only pay out if you die within this agreed term and has no investment element.

You can find further helpful life insurance information within our Buyer's Guide or you can Get Quotes now.

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