Cheapest Life Insurance Companies Of 2025 – Our Pick

The most popular form of life cover is ‘term life insurance’, which pays out if you die within the specified term of the policy. The policy term might be 10 years, for example, or 25 years, whatever you choose. There are different types of term life cover, including:

Level term: A level term policy pays out a fixed amount if the policyholder dies within a pre-selected period of time, known as the policy ‘term’. No matter how many years into the policy you pass away, your beneficiaries will receive the same payout, known as the ‘sum assured’.

This makes level-term cover well-suited to an interest-only mortgage, where only the interest is paid off but the capital debt does not decrease. While premiums remain the same during the term, they tend to be more expensive to those attached to decreasing term cover. If you survive the ‘term,’ your cover will end and you receive nothing back.

Decreasing term: With this type of term cover, the amount that will be paid out in the event of death reduces each year. It is typically taken out to cover a repayment mortgage, with the life insurance payout decreasing either in line with the projected fall in your mortgage balance or by a fixed percentage rate, such as 6% per year, for example. Decreasing term life cover is cheaper than level term cover, and tends to be popular as it can be a cost-effective option.

Increasing term: With an increasing term policy, the amount insured goes up every year, typically in line with inflation. But how the annual increase is calculated depends on the insurer and policy. It may be linked to an inflation index, an insurer-set multiplier or, rarely, simply rise by a fixed amount. Because the amount of cover becomes greater over time, premiums tend to be more costly than other types of life insurance and may be reviewable.

Pros and cons of term life cover

Pros

• lower cost than some forms of life insurance
• fixed premiums (for level and decreasing term)
• lump sum payout to loved ones (tax efficient if put into trust).

Cons

• no premiums returned if you outlive the term.

Unlike term insurance (which only pays out if you die within the policy term), a whole-of-life policy or whole life cover is designed to run for the remainder of your life. So, provided you keep paying your monthly or annual premiums, your loved ones are guaranteed to receive a payment when you die. However, for this reason, premiums for whole-of-life insurance tend to be more expensive than term insurance. Payouts for whole life cover are often used to offset an inheritance tax bill that your loved ones may receive in the event of your death.

Pros and cons of whole-of-life cover

Pros

• guaranteed payout on death
• proceeds can be used to pay IHT bill.

Cons

• cover is more expensive than term cover
• premiums can be reviewable, and are likely to rise
• usually need to pay premiums for life.

This type of policy covers just one person, opposed to joint life insurance (see below) which is used to cover a couple. That said, if you’re in a couple, you might consider taking out two single policies so your loved ones could potentially receive two payouts. With joint life cover the policy will end after the first claim, leaving the second policyholder uninsured. However, taking two single policies as a couple tends to be more expensive than a joint policy as you will also have to pay two monthly premiums, rather than one.

Pros and cons of single life cover

Pros

• potential for two payouts (where a couple takes two single policies).

Cons

• more expensive than joint cover for insuring two people.

A joint life insurance policy covers two people, usually who are married or in a civil partnership. It’s also possible to buy joint life insurance as an unmarried couple, or when you are financially linked to another person through other means, such as being business partners.

Joint life insurance means you pay just one premium for a policy which will provide cover for you both. However, the policy only pays out once, on the first person to die within the term. Before taking a joint policy, it’s worth checking whether two single policies could be better. While it means two sets of premiums, it also means two potential payouts.

Pros and cons of joint life cover

Pros

• cheaper than paying for two single policies.

Cons

• only one payout on first death during the term.

Some employees may have ‘death-in-service’ cover as part of a package of company benefits. This type of policy will pay a tax-free lump sum to your family should you die while working for your employer. This sum will usually be a multiple of between two and four times’ your gross salary, for example. You must be on your firm’s payroll to qualify for this cover.

Another type of life cover offered by employers is relevant life insurance, which tends to be for senior executives, or offered by smaller businesses where it is too expensive to set up a group death-in-service scheme.

While this type of life cover can be a useful benefit, it is only in place while you are employed by the company. As soon as you move jobs and start working for a new employer, you are no longer entitled to receive it.

Pros and cons of death in service cover

Pros

• cheaper than paying for two single policies.

Cons

• only one payout on first death during the term.

Over-50s life cover, sometimes called guaranteed life insurance, is cover designed specifically for those aged over 50. It pays out a guaranteed tax-free lump sum on death, but it tends to be a smaller payout (typically up to around £10,000). Many people take out a policy to help loved ones cover the cost of funeral expenses after they die, for example.

There is no medical underwriting, and all applicants are accepted for cover, irrespective of their current health or lifestyle. This can make this type of policy popular. Premiums are usually fixed for the duration of the policy, and offer guaranteed payouts, so long as you keep up with all payments.

However, these plans have come in for criticism because they can pay out less than a policyholder has paid in (particularly if you live for a long time), so be sure to do your research carefully before signing up.

Pros and cons of over-50s life insurance

Pros

• guaranteed payout on death
• no medical underwriting (all applicants accepted)
• can cover funeral expenses
• lower premiums, compared to term life cover.

Cons

• can pay much more in premiums than the policy pays out.

This type of life insurance works in the same way as ‘decreasing term insurance’. The policy is linked to your mortgage debt (so the term and value of the insurance is set up to match your mortgage size and term). The policy then pays out a lump sum, which would clear part of all of your mortgage, if you die during the term. As this cover is tied to your mortgage, the amount of cover reduces each year as you continue to pay it off. In many cases the insurance payout will reduce by a fixed percentage each year.

Note that if you bought this cover from your mortgage lender you could be paying over the odds. It could pay to switch to a different policy (ensuring, of course, you leave no gaps in cover).

Pros and cons of mortgage life cover

Pros

• pays out a lump sum on death to clear part of all a mortgage
• premiums are lower than level term cover

Cons

• only covers some or all of the mortgage debt (no cash left over from the lump sum).

You can usually add critical illness cover to a term life policy for an additional cost. It pays out a tax-free lump sum if you are diagnosed with a specific illness or medical condition listed on your policy – such as cancer, heart attack, stroke or loss of limb – during the term of the cover.

Critical illness cover is more expensive than term life insurance. So, while you should look to take out enough cover for your mortgage, debts and monthly bills, in reality, it may be a case of seeing how much you can afford.

Read the policy small print carefully, as insurance companies have a finite list of conditions they will cover. This can run to more than 100, but if your illness isn’t included, you won’t get a pay out. You may also be declined if you have withheld information about your medical history when you applied for cover, or if the illness you contract isn’t advanced enough.

In some cases the insurer may write to your GP to get medical information about you when calculating the premium you’ll pay for cover, and you may be asked to have a full medical (this tends to be where there are pre-existing conditions, for example), although the insurer will cover the costs of this.

Pros and cons of critical illness cover

Pros

• pays out a lump sum on diagnosis (must be from insurer’s list of illnesses and conditions)
• can help clear debts or with day-to-day living costs if you’re unable to work.

Cons

• relatively expensive compared to term life cover
• only pays out during the policy term.

This cover is a variation on term life insurance, but instead of the cover paying out a lump sum if you die during the term, it pays out a regular monthly income to your family for a set period of time instead. The term of the policy is often timed to cover the period children are at school, or until your child becomes non-dependent – though it can extend beyond this.

Generally speaking, the total paid out by the insurer under family income benefit will be lower than that paid out from term life cover. It also may not be sufficient to clear the mortgage, for example. But as the payout is lower, premiums are usually lower, too.

Pros and cons of income protection insurance

Pros

• pays out a regular income to help with day-to-day costs
• cheaper than term life cover.

Cons

• not designed to clear a mortgage or other large debts.