Life Insurance Advice for UK Families

Life insurance pays your family a lump sum if you die during the policy term. Whether you rent or own, that money helps them stay on their feet without you.

Life insurance pays your family a tax-free lump sum if you die during the policy term. It pays out on death only. It does not pay you anything if you fall ill or cannot work; that is what critical illness cover and income protection are for. You do not need a mortgage to need it. Your family decides how to spend the money: rent or mortgage, debts, bills, childcare or the years ahead. We advise on and arrange the right life cover for your family and budget.

Written by That’s Family Finance · Reviewed August 2026

If your family depends on your income, or you share a mortgage with a partner, the question is not really whether you need life insurance. It is whether the cover you have, or don't have, is good enough to protect them.

★

Free Trust Guidance, Included for Every Client

When your life insurance pays out, the last thing your family needs is a delay. Placing your policy in trust means the money goes directly to the people you choose, usually paying out without waiting for probate, usually outside your estate for inheritance tax, and arriving when it is needed most. We provide free trust guidance to every client, as standard.

Find out about our free trust guidance

What is life insurance and how does it work?

Life insurance pays a lump sum or regular income to your family if you die during the policy term. You decide how much cover you need, how long the policy runs, and which type suits your family best.

Premiums are set when you take the policy out. Depending on the type of plan, they may be fixed for the term or linked to an index. We will explain the difference and help you choose what works for your family.

Quick facts

Pays out tax-free
Can be written in trust
Joint or single policies available
Terms typically 5–40 years
Not tied to one insurer

The four main types of life insurance for UK families

Level Term

The payout stays the same throughout

Fixed lump sum if you die within the term. Good for families who want a guaranteed amount available, regardless of when a claim is made.

Decreasing Term

The payout reduces as your mortgage does

Payout reduces over time, broadly in line with a repayment mortgage. Often the most affordable way to make sure your mortgage is covered.

Whole of Life

Covers you for life, if premiums are kept up

No fixed end date. Covers you for your entire lifetime and pays out whenever you die, provided premiums are kept up. Often used for inheritance planning or funeral costs.

Joint Life

One policy, two people, pays on first death

One policy covering two people, paying out on the first death. A practical choice for couples and co-borrowers.

Who needs life insurance in the UK?

Your situation	Why it matters
Parents with young children	Gives your family money to live on and keeps a roof over their heads if you die
Homeowners with a mortgage	Your lender will not write off the debt. Your family could be forced to sell
Sole or primary earner	Your income keeps the household running. Losing it without cover is devastating
People with outstanding debts	Prevents debts becoming a burden on those left behind
Death-in-service benefit holders	Employer cover rarely covers a full mortgage and disappears when you change jobs

Take Mark and Claire, both 34, two children, and a £240,000 mortgage. Mark dies unexpectedly. Without life insurance, Claire faces selling the family home within months. With a decreasing term policy matched to the mortgage, the balance is cleared when the claim is paid. That is what this cover is for.

Why life insurance for families with a mortgage matters most

For most families, the mortgage is the biggest financial commitment they will ever make. Without life insurance, a death in the family can mean the surviving partner faces an impossible choice: keep up repayments alone, or sell the family home.

The right policy can take some of that pressure away. It can help clear the mortgage and help your family stay in their home.

How much life insurance do you need?

There is no single right figure. A sensible starting point is enough to clear your mortgage or cover your rent, pay off any other debts, and give your family a few years of living costs, including the cost of raising your children. Add up those numbers and you have a realistic target for the cover your family would actually need.

From there it is about balance, enough to protect your family properly, without paying for cover you do not need. That is exactly what a conversation with an adviser is for: we tailor the amount and the term to your real circumstances and your budget, rather than a one-size-fits-all quote.

Life insurance vs mortgage protection. What is the difference?

Mortgage protection is a form of life insurance built specifically around your home loan, often a decreasing term policy that tracks and clears your mortgage balance. Its job is simple: keep your family in their home.

Standard life insurance pays a fixed lump sum your family can use for anything, the mortgage, everyday bills, childcare or the future. Many families sensibly hold both. If your priority is the mortgage, start with our mortgage protection insurance guide.

How to get life insurance through That’s Family Finance

We make it straightforward:

Have a chat

Tell us about your family, your home and what you want to protect.

We compare insurers

We recommend and arrange it

We explain your options in plain English, set the policy up properly, including writing it in trust where it helps, and stay on hand afterwards.

There is no fee for our advice.

Why families choose That’s Family Finance for life insurance

Protection is what we do.Life cover, critical illness cover and income protection are our specialism, not a sideline. You get advice from someone who arranges this cover every day.

Not tied to one insurer.We compare insurers for the cover and price that suit you.

Plain English, done properly.We explain your options clearly, help you avoid gaps and mistakes, and write policies in trust where it benefits your family.

Advice comes from That’s Family Finance. Talk to us →

Your life insurance questions answered

How much life insurance do I need?

A common starting point is enough to clear any mortgage and other debts, plus a few years of living costs for your family, but the right amount depends on your family, your outgoings and your budget. An adviser works it out with you, so you are not paying for cover you do not need or leaving a gap where it matters.

What is the difference between life insurance and mortgage protection?

Mortgage protection is a form of life insurance designed specifically to clear your mortgage, often decreasing term cover that tracks the balance as you repay. Standard life insurance pays a fixed lump sum your family can use for anything. Many families combine both. Read our guide to mortgage protection insurance.

How much does life insurance cost?

It depends on your age, your health, whether you smoke, the amount of cover and the policy type. Term life insurance is usually the most affordable option. We compare insurers to find the right cover at the right price, and the cost is confirmed clearly before you commit to anything.

Do I need a medical to get life insurance?

Not always. Many policies are accepted on health questions alone; some ask for a medical or a GP report depending on your age, the cover amount and your health. We tell you what to expect before you apply, so there are no surprises.

Is a life insurance payout taxed?

A life insurance payout is normally free of income tax and capital gains tax. It can form part of your estate for inheritance tax, but writing the policy in trust usually keeps it outside your estate and gets the money to your family faster. We can arrange this for you at no extra cost.

Can I get life insurance if I have a health condition?

Often, yes. Many conditions can be covered, sometimes with an adjusted premium or terms. As an adviser we know which insurers tend to look most favourably on particular conditions, which can improve your chances of getting the right cover at a fair price.

Other protection insurance for your family

Provider guides: Zurich life insurance, Vitality life insurance, Royal London life insurance and Aviva life insurance.

Protecting the mortgage is the part we advise on ourselves. Read how mortgage protection insurance works, including which type of cover suits which situation.