Life insurance myths and facts

Almost half (48%) of UK adults aged 18 - 40 don't have a life insurance policy in place[1].

Could this be because they don’t see the need for life insurance or because they don’t know much about the product?

The internet is full of life insurance myths and facts; Reassured are here to assure you of what’s true, and what’s false, to help you make an informed decision on whether it’s right for you.

In this article, we’ll be busting the most common life insurance myths, such as:

  1. Life insurance is too expensive »
  2. I can’t take out life insurance with a pre-existing medical condition »
  3. I don’t need life insurance because I’m young »
  4. I don’t need life insurance because I have death in service »
  5. Insurers don’t pay out »
  6. I’m a stay-at-home parent, I don’t need life insurance »
  7. I’ll need to take a medical exam »
  8. I need life insurance for a mortgage »
  9. Life insurance is too confusing »
  10. COVID-19 has had an effect on ability to secure life insurance »
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What is life insurance?

Life insurance is a type of policy that pays out a cash lump sum to your loved ones if you pass away during the term.

During the application process, you’ll choose your sum assured (how much you’d like to be paid out) and how long you’d like to be covered for.

You’ll need to pay a monthly premium to keep your cover valid and, if you pass away during the term of your policy, your loved ones can make a claim and a pay out will be issued.

A life insurance pay out can help loved ones to cover mortgage or rent payments, cover daily family living costs, provide funds to pay for your funeral or it can be left as an inheritance for loved ones to spend how they wish.

There are different types of policies to suit different needs. Typically, you’ll have the choice of:

  • Level term life insurance
    You’ll be covered for a specified period of time (the term) and the policy will pay out if you pass away during this time. The cover amount (sum assured) remains fixed throughout the policy term, making it ideal for helping cover large expenses, such as an interest-only mortgage, family living costs or leaving an inheritance
  • Decreasing term life insurance
    Cover will last for a specified period of time, as with level term cover. Although with decreasing term, the pay out sum will reduce over the policy lifetime, making it ideal for helping cover a repayment mortgage. This way you can have your sum assured reduce in line with your remaining mortgage balance
  • Whole of life insurance
    You’ll be covered for the rest of your life and a pay out will be made to your loved ones when you pass away, helping to provide an inheritance. Due to providing lifelong cover, whole of life tends to be a more expensive option than term life insurance
  • Over 50s plan
    You’ll be guaranteed acceptance if you’re a UK resident aged 50 - 85, with no need to provide any medical information. Once in place, cover lasts for life and can be used to help cover funeral costs or be left as an inheritance

You’ll also have the option to add additional levels of cover to your policy in the form of:

  • Terminal illness cover
    Will allow you to receive an early pay out from your life insurance policy if you’re diagnosed with a terminal illness and given less than 12 months to live. This comes as standard with all term policies taken out through Reassured
  • Critical illness cover
    Will allow you to make a claim if you’re diagnosed with a serious illness that’s listed within your policy. This can be added to a life insurance policy for an additional fee or can be purchased as a standalone policy through some providers

How much family life insurance do you need?

Fill in your financial commitments and other costs you’d like your policy to cover to calculate the level of family life insurance cover you need.

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£137,934 is the estimated mortgage debt per household in the UK.

The purchase of a home is likely to be the largest financial commitment any of us will make in our lifetime. Your life insurance should cover your remaining mortgage balance to allow your loved ones to stay in the family home should anything happen to you.

Source: Moneynerd.co.uk
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The average monthly household budget in the UK is £2,548 (that’s £30,576 per year), which is spent on transport, food & drink, utilities (gas, electricity, water etc), clothing, council tax and leisure activities.

With energy prices hitting a record high and the cost of living rising sharply in the UK, you may wish to factor in utility bills and family living expenses into your cover.

Source: Nimblefins.co.uk
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The average personal debt of UK adults has risen to £34,566 (not including mortgage debt), with credit cards, personal loans and overdrafts being the most common forms of debt.

Factoring in any debts into your life insurance cover means that, if they need to be paid back from your estate after your passing, your loved ones won’t miss out financially.

Source: Money.co.uk
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According to SunLife, the average cost of a funeral in the UK is £3,953 (with the overall cost of dying at £9,200).

Funeral costs have increased by 116% since 2004 and are a significant cost which should be factored into the amount of life insurance you secure.

Source: SunLife.co.uk
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When factoring in cover for your children, you may wish to calculate the amount based on how long it is until they reach financial independence.

This could include childcare (£7,000 per year for part-time care), school expenses (£1,519 per school year for uniforms, lunches, stationary etc), as well as an additional sum for further education (this could be a contribution of up to £5,000 per year).

Sources: Daynurseries.co.uk, Primarytimes.co.uk & Savethestudent.org
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2 in 5 adults say they are relying on an inheritance to fund their retirement.

Factoring in an inheritance to your sum assured could allow loved ones to live a more financially comfortable life. Alternatively, you could leave a cash gift to a charity of your choosing.

Source: Moneyage.co.uk
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If you’re lucky enough to have your own savings or are part of the 30% of UK residents who already have a life insurance policy in place, this can provide financial protection for loved ones.

By entering your current cover, savings or death in service amount you can reduce the sum assured you require.

Source: Scottishbusinessnews.net
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What are some common myths about life insurance?

When it comes to life insurance, there’s a plethora of information (and misinformation) on the internet.

Without the right guidance it can be hard to know what to believe.

Below we have taken 10 common myths about life insurance and will be exploring whether they’re true or false...

MYTH 1: Life insurance premiums are expensive

False - The most common myth surrounding life insurance is that it’s too expensive. But this simply isn’t true.

Securing affordable life insurance is possible. In fact, it’s possible to take out life insurance from just £5 per month through Reassured.

It’s true that some forms of life insurance are more expensive than others, but this doesn’t mean that finding a policy to fit into your budget is a difficult endeavour.

The cost of your life insurance premium will depend on a variety of factors which are taken into consideration during the application process. This includes:

  • Your age
  • Your medical history
  • Your smoking status
  • Your weight/BMI
  • Policy length (the term)
  • Cover amount (sum assured)

The table below shows common types of life insurance and example prices for each age group. These examples are based on a non-smoker who’s in good health, for £100,000 of cover.

AgeLevel term price per month (20 year term)Decreasing term price per month (20 year term)Whole of life price per month
20£3.50£3.50£58.10
25£3.67£3.50£61.74
30£4.59£3.96£67.57
35£6.16£4.56£78.71
40£8.43£5.92£91.86
45£12.22£8.13£107.20
50£19.20£11.86£114.05


Comparing quotes from multiple insurers will help you find a good price. Reassured can help you with this to ensure you secure the lowest premium from our panel of leading insurers.

Simply get in touch for your free and no obligation quotes.

MYTH 2: I can’t take out life insurance because I have a pre-existing medical condition

False - It could still be possible to secure life insurance with a pre-existing medical condition.

When applying for life insurance with a medical condition, insurers will take your personal circumstances into consideration.

If your condition is mild and/or has little effect on your everyday life, your premiums may not be significantly affected and, in some cases, it may be possible to take out cover on standard terms.

If your condition is more severe, it could still possible to secure cover. However, your premiums may be inflated (or loaded) due to the increased risk and your policy may need to undergo manual underwriting.

For more difficult cases, it may still be possible to take out cover using the help of a specialist insurer. These are providers who are better equipped to provide cover to high-risk life insurance applicants.

We have written a comprehensive article on securing life insurance with a pre-existing condition if you require additional information.

At Reassured we work with both leading providers and specialist insurers (through our advised team) to ensure you find the cover you need.

MYTH 3: I don’t need life insurance because I’m young

True / false - You may not need life insurance if you’re single, have no one that depends on you financially and have no large financial commitments.

However, securing life insurance at a young age can often be the best time to do so.

This is because insurers take key information into consideration at the point of application, including your age and your medical history.

When you’re young and in good health you pose less of a risk to the insurer, so you’re usually rewarded with favourable premiums.

As you get older, your life expectancy shortens and insurers deem you as more of a risk to insure. For this reason, premiums tend to be higher the older you take out life insurance.

If you take out life insurance at a young age, it can be possible to change your sum assured as you get older and if your circumstances change.

Some policies come with a special events clause which will allow you to change your level of cover without the need for additional underwriting (please note, not all policies have this option).

If you're aged 18 -30 you may want to read our life insurance for young adults article for more information.

MYTH 4: I don’t need life insurance because I receive a death in service benefit

False - While having death in service benefit in place can help to reduce the amount of cover you may require, it doesn’t mean you don’t need life insurance full stop.

With death in service benefit, the amount paid out to your loved ones upon your passing is often a multiple of your salary, (most commonly three times your salary).

While this is a generous benefit, it’s unlikely to cover all financial commitments for your loved ones - such as a large mortgage.

It also won’t follow you, so if you cease employment with an employer who offers this benefit there’s no guarantee that your next employer will provide death in service - which could leave your family unprotected.

A separate, personal, life insurance policy can help to top up your death in service benefit to ensure that essential costs are covered for your loved ones.

MYTH 5: Life insurance providers don’t pay out

False - A common misconception about life insurance is that insurers don’t pay out, but this isn’t true.

Only in rare circumstances will insurers deny a pay out.

Statistics from the ABI (The Association of British Insurers) show that in 2023, 96.7% of life insurance claims were paid out, with 97.4% of all protection claims being paid out in the same year [2].

If you want peace of mind about some of the UK’s leading providers and their pay out rates, you can read our full life insurance pay out rates guide.

MYTH 6: I’m a stay-at-home parent, I don’t need life insurance

False - The loss of a stay-at-home parent can have a devastating financial impact on your family.

If a stay-at-home parent passes away, could the breadwinner afford to pay additional childcare fees or would they need to cut back on working hours, or even change career, to allow them to look after the children?

With this in mind, it’s important for both the breadwinner and stay-at-home parent to be adequately protected.

MYTH 7: I’ll need to take a medical exam during the application

False - Insurers won't always request a medical exam as part of the life insurance application.

Insurers are more likely to request a medical exam if you disclose a severe pre-existing medical condition, or other high-risk factors.

This is so that they can gain a better understanding of your health and wellbeing, and how your condition affects you, before offering you cover.

The exception to this is an over 50s plan, where you could secure life insurance with no medical information being disclosed. If you’ve struggled to secure life insurance without having to undergo a medical in the past, this could be an ideal option for you if you fit into this age bracket.

Why not compare over 50s plans from two leading providers using our award-winning broker service?

MYTH 8: I need life insurance for a mortgage

False - You’re not legally required to take out life insurance to protect your mortgage, but as a mortgage is the largest debt you’ll likely have in your lifetime, it makes sense to protect it.

If you were to pass away, could your partner afford to make mortgage repayments without the help of your income?

A life insurance policy could help provide the funds for the mortgage to be paid off in full to ensure your loved ones can remain in the family home.

Some lenders may ask you to take out life insurance as a precondition for letting you borrow money and they may request you take out a policy before they release any funds to you.

Many lenders will push you to take out cover through their preferred life insurance provider, but it’s unlikely you’ll get the best deal by doing this.

A friendly member of our team can help you to compare quotes from some of the UK’s best life insurance providers to help you find the right policy (at the right price) to help protect your mortgage.

Simply get in touch for your FREE no-obligation quotes.

MYTH 9: Life insurance is too confusing

False - While it can seem like a daunting task initially, securing life insurance is actually a straightforward process.

Taking out life insurance can work as simply as:

  1. Start the application process
  2. Decide on a sum assured and how long you’d like to be covered for
  3. Reassured can compare the different policy options to help you find the best policy at the right price
  4. Secure the policy that best meets your needs
  5. Once cover is in place, continue to pay your monthly premium
  6. If you pass away during the policy term, your loved ones can make a claim and a pay out will be issued

There are many life insurance experts out there that are happy to help you in your quest to secure life cover.

A life insurance broker (like Reassured) can provide you with all the information you need and decode any jargon you might not understand, to help you make an informed decision on what option is best for you.

Why not read our how does life insurance work in the UK article for more information?

MYTH 10: COVID-19 has had an effect on ability to secure life insurance

False - The Coronavirus pandemic actually had a minimal effect on life insurance.

The only changes are that you may be asked some COVID related questions during the application process.

Rest assured; you could still take out life insurance even if you’ve had Coronavirus.

You can read our extensive life insurance and coronavirus guide to find out everything you need to know.

Life insurance FAQ's

What is the most common reason for taking out life insurance?

Buying your first home, getting married and starting a family are common triggers for securing life insurance.

But reasons for taking out cover can vary from person to person. Other common reasons include:

  • Wanting to leave an inheritance
  • Wanting to protect loved ones from funeral expenses

Does life insurance pay out forever?

No, a life insurance policy will pay out in one lump sum.

The exception to this is a family income benefit (FIB) policy, which will pay out in monthly payments to your loved ones for the remainder of the policy term.

For example, if you have a policy with a 20-year term and pass away 5 years into the policy, your loved ones will receive pay outs for the remaining 15 years.

What reasons will life insurance not pay out?

It’s very rare but in some instances, a pay out can be denied. Reasons for this can include:

  • If you pass away after the term of the policy has ended
    Term based policies have a defined start and end date. Therefore, if you pass away after the policy term has elapsed your loved ones will not receive a pay out
  • You pass away during the waiting period of your policy
    Some policy types, such as an over 50s plan, may include a waiting period. This refers to the first 12 – 24 months of the policy where, if you pass away due to natural causes, a pay out won’t be made. Any premiums paid into the policy will be refunded to your loved ones
  • Insurers discover non-disclosure
    Non-disclosure     refers to not telling the full truth on your life insurance application. For example, if you declared that you were a non-smoker and then passed away to a smoking related illness, this would be an example of non-disclosure and insurers would deny a pay out

Who gets life insurance money?

Proceeds from a life insurance pay out will be paid to the named beneficiary/beneficiaries of the policy.

If there’s no beneficiary listed, the funds will be added to your estate.

How do you claim life insurance money after death?

After your passing, your loved ones can make a claim on your life insurance policy.

They’ll need to contact your provider in order to start the claims process.

For this reason, it’s important that your loved ones are aware of the policy and know where to find the necessary details.

Can life insurance be used to pay for your funeral?

Yes, the funds from a life insurance pay out can be used by your loved ones to help cover your funeral costs.

However, the funds won't be paid directly to a funeral provider.

If looking for a policy to specifically cover funeral costs, you may want to consider a funeral plan.

Please note, Reassured are unable to sell funeral plans. If you are looking for a funeral plan we suggest you check the FCA register to find a regulated provider.

Compare life insurance quotes

Hopefully this article has helped to clarify any myths about life insurance you may have heard.

Taking out life insurance doesn’t have to be a difficult or confusing endeavour.

Using a broker service, like Reassured, will allow you to ask all the questions that you need - helping to clear up any life insurance myths and misconceptions.

Not only that but we can help you to compare quotes from some of the UK’s leading providers.

And the best part is, our quotes are fee-free and without obligation - so why not get in touch?

Compare Life Insurance Quotes with Reassured »

Sources:

[1] https://www.ftadviser.com/life-insurance/2023/08/02/nearly-half-of-uk-adults-do-not-have-life-insurance/

[2] https://www.abi.org.uk/news/news-articles/2021/05/record-amount-paid-out-to-help-families-cope-with-bereavement-ill-health-and-injury/

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