Life Insurance and Protection — What You Need to Know

If someone depends on your income — whether that's a partner, children, or a business — having the right protection in place is essential. This guide explains the main types of protection and helps you understand what you might need.

Life insurance isn't just for homeowners. Renters, parents and anyone with people who depend on their income can use it to leave their family financially secure — covering everyday living costs, childcare or debts, not only a mortgage.

The three pillars of protection

1. Life insurance

Life insurance pays out a lump sum if you die during the policy term. It's designed to:

• Clear your mortgage so your family can stay in the home
• Replace your income for a set number of years
• Cover funeral costs and outstanding debts
• Provide financial security for your dependants

Use our Life Insurance Needs Calculator to estimate how much cover you need.

2. Income protection

Income protection pays a monthly benefit if you can't work due to illness or injury. Key features:

• Typically pays 50-70% of your gross income
• Continues paying until you return to work, retire, or the policy ends
• You choose the deferred period (how long before it starts paying)
• Especially important for self-employed people with no employer sick pay

Use our Income Protection Calculator to see what you might need.

3. Critical illness cover

Critical illness cover pays a tax-free lump sum if you're diagnosed with a specified serious illness, such as cancer, heart attack, or stroke. This can be used for:

• Paying off your mortgage
• Covering medical costs or adaptations
• Replacing income during recovery
• Providing a financial buffer for your family

The three pillars at a glance

Types of life insurance

There's no single "life insurance" — the right shape depends on what you're protecting:

• Level term: the payout stays the same across the term. Good for protecting your family's income or an interest-only mortgage.
• Decreasing term: the payout falls over time, usually to track a repayment mortgage. Cheaper, because the sum assured reduces.
• Whole-of-life: cover that lasts your whole life and is guaranteed to pay out, often used to cover an inheritance tax bill. Premiums are higher because a claim is certain.
• Family income benefit: instead of a lump sum, it pays a regular income to your family for the rest of the term — simple and often very cost-effective.

How much cover do you need?

A common starting point is enough to clear your mortgage and debts, plus a multiple of your income to replace your earnings for the years your family would need it. Factor in childcare and future costs like education. It's easy to under- or over-insure, so use our Life Insurance Needs Calculator as a guide, then let an adviser refine it.

Should you write it in trust?

For most family protection, yes. Writing a policy in trust means the payout goes to your chosen people quickly, skips probate delays, and stays outside your estate for inheritance tax. It's usually free to set up at outset — an adviser can arrange it alongside the cover.

Who needs protection?

• Homeowners with a mortgage: Life insurance is essential to protect your family's home
• Parents: If your income supports your children, protection ensures they're looked after
• Self-employed: Without employer sick pay, income protection is particularly important
• Business owners: Consider business protection and relevant life cover

How much does it cost?

Protection is often more affordable than people expect. Premiums depend on your age, health, and the level of cover. Many people find comprehensive protection for the cost of a few takeaway coffees a week. Take our Protection Gap Quiz to identify where you might be underprotected.

This guide is general information, not personal financial or insurance advice. The right cover depends on your age, health, circumstances and budget, and policy terms vary by insurer. Speak to a qualified adviser to compare options and arrange cover tailored to you.