Life insurance (also called "life assurance") protects your loved ones and dependants from financial hardship if you die. Policies can pay out income or a lump sum and can be used for clearing a debt such as a mortgage. With so many different policies available it's important to choose one that best suits you and your family's needs.
The main types are term assurance and whole of life. Term assurance means you decide how long you want the cover for (the term) and the amount of cover you need. If you die during the term the policy will pay out a lump sum. Term assurance is often used to cover specific debts, such as your mortgage.
A whole life insurance policy covers you for your entire life, not just for a specific period. However, crucially, it will not generally guarantee the amount it will pay out. Whole of life policies are more expensive and complicated than term assurance policies.
This type of policy could be used by someone who wants a lump sum paid out when they die to cover inheritance tax or funeral expenses.
Family income benefit is a type of term assurance which a lot of people don't know about and may be more widely used if they did. Instead of paying out a lump sum the policy provides a tax-free income to you or your family if you became terminally ill or die. The income finishes when the policy comes to the end of its term.
This type of policy is often used by young families with children to provide a regular income for a set period, say through to when the children finish further education.
Accidental death insurance is a type of term assurance which pays out a lump sum if you die from an accident. You don't usually have to prove that you are in good health to take out this type of insurance, so you could use it if you have difficulty getting life cover because of your medical history.