Article On: ‘Death Insurance UK’

‘Insurance Policy for Death’ UK

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Difference between ‘Life Insurance’ v ‘Death Insurance’ is?

As Life Insurance Brokers we are often asked, what is the difference between a ‘life insurance policy’ and a ‘death insurance policy’?

Essentially the answer is….they are exactly the same thing ie; insurance death cover is a sum paid to your family and loved ones, to provide them with financial support. Or repay a mortgage or debt, all in the event of death (or a terminal illness leading to death).

The real answer probably goes back into historical times, to when insuring & protecting someone’s family against their death was originally created.

Though modern life insurance cover (or ‘death insurance cover’) seems like an every day feature of business, it can actually be traced back into ancient Greek & Roman times.

Their military leaders allegedly thought up a type of death insurance “burial club” among their fellow soldiers. This fund was designed in which, should one of them be killed in any military campaigns, their fellow survivors would band together to help cover their families death expenses.

So these sophisticated early societies helped together form both the beginnings of some life & health insurance provisions. However, it was only for their fighting forces and probably just the men.

Whilst this idea at the time was initially only applied to military soldiers, the concept later spread throughout ancient times & was eventually adopted by everyday citizens.

These small organizations later expanded this insurance death benefit fund to ultimately providing a financial safety net to help the family members of those who have fallen in battle. Sounds sort of similar today?

Moving forwards in time to the creation of Lloyds of London back in the 1600’s. They then moved onto to develop insurance underwriting as we now know it ie; not just insuring everyone & everything equally but assessing the risks.

Over time the words ‘death insurance’ was probably harder to sell & discuss with people when alive as to what death insurance is. So instead, the kinder sounding phrases ‘life insurance’ & ‘life assurance’ became synonymous.

‘Death Insurance UK’

Death Policy Insurance UK Types

We will now look at 6 different types of ‘death insurance uk’ policies available in the market place.

  1. Level Term
  2. Increasing Term
  3. Family Income Benefit
  4. Decreasing Term
  5. Whole of Life
  6. Over 50’s
  7. Funeral Insurance

The first 5 types of ‘insurance policy for death’ listed are all fully underwritten. This means Insurers usually ask a range of both personal and family medical & lifestyle questions before offering any terms.

This may also require medical & GP reports. Once any life insurance death cover deal is then agreed and onto risk, you are then insured immediately, which means no waiting periods before a claim payout.

The 6th type of policy listed asks no medical questions & also requires no GP reports to qualify. However, to do so means there are waiting periods. Most plans will also include free ‘terminal illness’ cover.

All Policy payments are usually paid free of uk income tax. However, they could be subject to UK Inheritance Tax.

death insurance uk
* source thesaurus plus | av lexis

1] Level Term Insurance

Level Term Insurance policy for death: The amount of lump sum payout remains the same (or level) both from the start to the end of the plan.

For example, if a level term life insurance was setup for say £175,000 and you then died in year 20, it would still payout the same £175,000.

However, as it runs for a specified term eg; 25/35/45 years, then any death claim payout will only be within that agreed time frame. So if your plan ran for 35 years, but you died in an accident in year 35 & 2 months, then the plan has ended, so it would not then payout. You can take a term death policy upto age 90.

Note: You could choose a convertible or renewable life insurance lump sums option from outset within this plan, allowing the choice to either replace it with a whole of life insurance or another plan, without health evidence. You may also have the option to include critical illness cover benefit.

2] Increasing Term Insurance

Increasing Term death policy insurance: The lump sum amount of payout cover may increase annually from the start to the end of the plan (to help offset rising inflation).

You can choose whether this increase is by Average Earnings, RPI or a fixed rate ie; 5%. This means the payout risks to the UK Life Insurers also increases from start to end. So some Insurers therefore charge an extra premium from outset, to account for this increasing & rising insurance risk, without asking for ongoing medical evidence at each increase.

For example, if an increasing term life insurance was originally setup for £50,000 over 30 years but you died in year 17, it may now payout around £75,000 (due to increasing by say RPI).

The same rules apply as above re time frames and any lump sums claim.

3] Monthly Family Income Benefit Insurance

Family Income Benefits plan [FIB]: This insurance pays upon claim a tax-free monthly income, within the agreed policy term. Some FIB plans you can opt to be paid the uk death benefit quarterly or annually at claim. You may also have the option to include critical illness FIB benefit.

With a family income benefit policy, it works abit similar to mortgage decreasing cover. This means the regular monthly income payout period decreases over time from policy start to end, but the premium remains level.

For example: If a FIB was setup to pay £1,500pm over 18 years term to cover children (whilst still dependant) & you died in year 13. Then, it would just payout £1,500pm for the remaining 5years & then the plan end.

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4] Decreasing Term Death Insurance for Mortgage

Decreasing term death insurance on mortgage: The insurance payout cover slowly reduces, from the start to the end of the plan but the premium remains level. Usually decreasing plans are used for Mortgage Life protection or Loan repayment ie; It follows the reducing debt over its term.

For example: If a mortgage policy was originally setup for £277,000 over 30 years (to protect a £277,000 repayment mortgage agreed also over 30 years) but you now died in year 20. The decreasing plan may now payout say around £140,000 ie; the ‘death insurance for mortgage’ has decreased inline around what you may owe on your mortgage.

5] Whole of Life Insurance

Whole of Life ‘death insurance policies’: The life insurance death benefit amount will always payout, whenever you die (as long as the premiums have been paid & all policy terms fulfilled).

Whole life assurance maybe best if asking ‘does life insurance cover funeral costs’. These typically are also used for funeral cover insurance uk, and are therefore unlike term plans (which only run for a set term) and you could outlive..

For example: if the death policies was £30,000 & you then lived amazingly upto aged 195…it would still payout ie; £30,000 is essentially guaranteed as your life insurance with funeral expenses.

6] Over 50’s No Medical Insurance

Over 50’s no medical ‘death policies’: These are also rest of life or whole of life insurance (meaning ongoing cover). However, there are usually no in depth medical & lifestyle questions to qualify. Note: Smoker or vaper status is still asked & this affects death policy insurance pricing.

However, because of fact there are no medical questions, then there are usually 1 or 2 years initial exclusion period before any full natural death insurance claims.

Typically Insurers in this period offer a refund of premiums only if you died of natural causes (during this exclusion period). Insurers may often stop taking premiums from age 90/95 – but maintain your ‘insurance for death’.

Generally, these are not as good value compared to underwritten whole of life (Type 5) but are useful if you suffer from some adverse health issues, meaning it maybe difficult to get affordable terms.

7] Funeral Insurance

Typically most whole life assurance schemes are often advertised as funeral expenses life insurance, insurance to cover funeral costs rather than leave a legacy.

Whole lifecover could be used as a funeral insurance uk policy as either a ‘cremation insurance’ or ‘burial insurance’ back up plan.

Note: You need to consider given rising inflation and its impact on any ‘funeral insurance cost’ if taking out level cover policy only.

Alternatively, if taking out just a small amount of cover today equivalent to what you think could be a typical funeral cost & what this maybe its true financial worth in the future when potentially required?

life expectancy uk calculator
UK Life Expectancy Average

Broker FAQ ‘Insurance for Death’

How much does this cost?

This is a good question. With rising monthly household bills & pressed family budgets into these Pandemic 2020’s, most people are naturally looking to save money + be money savvy. This is understandable.

Death Policy Insurance prices often start from as low as £5pm via Leading UK Life Insurance CompaniesHowever, we will comment on how sometimes going cheapest….is sometimes NOT the best move & maybe costly in the long run.

But let’s turn the question around and ask instead the advice of Money Savings Expert via its well known founder Martin Lewis.

What is Martin Lewis’ Insurance best formula then?

The Money Saving Expert (MSE) Martin Lewis has become the ‘go to person’ for all matters financial. His insurance guidance is often followed by many people.

He was appointed both OBE & CBE in the Queen’s honours list as a thank you for his services rendered to the UK.

For Martin Lewis on Life Insurance, his ideal insurance advice is for a good rule of thumb use the ‘THE 10 x RULE’.

His basic MSE cover formula is to therefore aim to cover ’10 x the Annual income of the highest earner or main breadwinner – until any kids have finished full-time education.

Using that principle, if you earned £35,500pa gross, he says you should maybe consider insuring yourself (after any mortgage, loans & debts are repaid) for @ £355,000 life insurance (ie; 10 x the annual gross income).

Interestingly, he recommends just insuring your gross income of £35,500pa – but not get complicated with calculating net after tax incomes

Following on from this basic MSE example formula above, if you then worked for the next 29 years until retirement, you could potentially earn around £1 million gross ie; £35,500pa x 29 years = £1 million [or more with any future inflation wage rises].

Chances of making a death insurance claim
*Claim chances still changing re Covid 19

Apart from losing a loved one, this real hidden income threat is what could be lost if the main breadwinner died prematurely. 

As such, unlike the simple 10 x £35,500 gross salary insurance example – you could instead protect your family with either;

  1. Income = £2,958pm or £35,500pa family income benefit lifecover policy
  2. Lump sum = £1 million level term policy [if invested @3.55% = £35,500pa]
  3. Or a mixture of the 2 policy types over the next 29 years – all dependant on your family life circumstances.

Neither takes into account repaying any mortgages, loans or debts.

  • You can decide wether you want the cover to be level or inflation linked
  • Single plan | 2 x seperate plans | Joint life insurance 1’st claim | Lump Sums or Family Income Benefits options

So, as Financial Advisers we are not saying this Martin Lewis formula of 10 x salary is therefore a 100% one size fits all ie; not applicable for everyone’s own personal family or business life situation.

You may also feel this is either not enough cover, or perhaps too much for your own circumstances, if trying to be money savvy on your death insurance decisions.

So, I would re-summarize the Martin Lewis insurance protection formula as follows…

Life Insurance | Martin Lewis Money Savings ExpertThat is to ideally ‘Protect 3 Things’…

  1. LUMP SUM > Repay any mortgage & debts, final expenses costs
  2. INCOME > Help to cover all your monthly bills
  3. LUMP SUM > Back up Plan for holidays, education, emergencies

Our ‘death insurance uk’ formula is naturally dependant on wether you are married or cohabiting, have young or old dependants, retired or both working still. Have sufficient backup already in any investments & savings.

Ultimately, the ideal insurance amounts to cover are also down to your budget. This calculation could also be made harder due to any pre-existing health history or lifestyle issues, meaning possibly higher ‘rated insurance premium’ costs. Contact us for personalized advice.

Death Insurance Age Based | Low Start Guaranteed?

A comparison or direct website shows a cheap uk death benefit insurance premium & you see the word ‘guaranteed’ noted by all premiums.

You may assume all these insurance plans quoted as guaranteed are all the same? WRONG.

Some Insurers offer Age Based or Low Start policies where it says their premiums are ‘guaranteed’ hidden within their T&C’s. However, the only thing that’s guaranteed is that the price will go up annually or regularly in line with an Insurers guaranteed age-based formula. eg; ‘Smart Insurance UK’ offer a age-based whole of life plan. This means the older you are, then the more expensive the life insurance cover gets each year.

This maybe therefore NOT a wise insurance decision, as in this instance it could work out the most expensive policy in the end, against a level premium plan. What perhaps started off as say £24pm – could end being £100pm in the future.

There are also some Insurance companies like Vitality Life, that may offer Healthy Living Assessed plans through regular exercise & health reviews. These plans reward you if you maintain a regular healthy lifestyle.

However, although this is naturally a good thing, your premiums could go up as well as down ie; if you don’t regularly engage with their Healthy Living programme or are unable to as you get older, your monthly premiums may then increase.

Fixed Guaranteed Premiums are ideally the way to go only if you prefer to operate on a fixed budget & don’t want to be regularly re-assessed. The devil is in the death policy insurance details.

Insurance Death Cover

uk death benefit insurance costs

Death Policy Insurance into Trust

Placing a life policy for death in trust can help to ensure that the cover benefits go direct to the correct beneficiaries you decided to nominate at that stage. It can also help avoid possible probate delays & Inheritance Tax costs. Without a suitable trust, the proceeds can fall back into your estate.

Most Insurers now all kindly provide their available standard trust form wordings for free (seek legal advice if unsure these are satisfactory).

However, as brokers we find some Insurers offer their trusts as a total online process & others are still old fashioned paperwork. This then requires you to get all your trustees & witnesses to all sign the trust forms, before posting it back to the Insurers who then check the accuracy of your completion.

‘Burial Insurance’ & Government ‘Funeral Cost Insurance’ help

Some families are perhaps unable to afford insurance for death or hadn’t considered it before unfortunately a loved one died unexpectedly.

So are now looking for Government help afterwards toward free burial insurance uk or ‘funeral expenses insurance’.

As such, you could get a Funeral Expenses Payment (also called a Funeral Payment). It maybe applicable if you get certain benefits and need financial help toward any funeral costs insurance aside you’re arranging.

This Funeral Expenses Payment will then be deducted from any money you may get from the deceased’s estate.

Their estate includes any money or property they had. It does not include a house or personal things left to a widow, widower or any surviving civil partner if calculating this funeral expense insurance help.

A Government Funeral Expenses Payment can then help pay for some of these typical 5 costs:

  1. Burial fees – for a particular plot
  2. Cremation fees – to include the cost of the doctor’s certificate
  3. Travel costs – to arrange or go to the funeral
  4. Cost of moving a body within the UK – if it’s being moved over 50 miles
  5. Death certificates – or other legal documents

You may also get up to £1,000 help with funeral cost uk towards any other funeral expenses ie; funeral director’s fees, flowers or the coffin.

This payment will often not usually cover all of the costs of the funeral. How much you get depends on your circumstances. This includes any other money that’s available to cover the costs, for example from an insurance policy or the deceased person’s estate.

UK Death Benefit | UK Death Grant

Government UK Death benefit or Bereavement Support Payment maybe available if your husband, wife or civil partner died in the last 21 months. The rules changed in 2017.

To qualify for a UK Death Grant rules state you must claim within 3 months of your partner’s death to get the full amount of ‘death benefit lump sum uk’. You can claim for uk death benefits up to 21 months after their death but you’ll get fewer monthly payments.

Citizens Advice points out how to claim & the amounts

  • If you don’t have children: ‘Death benefit lump sum uk’ of £2,500 & £100pm for up to 18 months
  • If you have children or you’re pregnant: ‘Death benefit lump sum uk’ of £3,500 & £350pm for up to 18 months
  • You won’t have to pay tax on any of the payments, including the lump sum
  • Any uk death benefits monthly payments won’t affect your other benefits
  • However, if you still have some of the uk death grant lump sum left after a year, it could affect the amount of other benefits you can get

You may also be able to get a Funeral Expenses Payment (or Funeral Payment) if you get certain benefits and you need help to pay for a funeral you’re arranging.

UK Widows Benefit

Uk Widows Benefit is now known as bereavement support payments since 2017. As mentioned above, it maybe available if your husband, wife or civil partner died in the last 21 months.

There are several ways you can claim UK Widows Benefit | Bereavement Support Payments in the 2020’s. You can:

Once you’ve completed your form, you need to take it to your nearest Jobcentre Plus or you can send it to the following address:

Bereavement Support Payment
Mail Handling Site A
WV98 2BS

Bereavement in the Family

UK Death Grant | Insurance for Death

Bereavement in the family means losing someone close through death.

It is a devastating event. It can turn our everyday world upside down. It can change our lives forever. It is probably the worst loss one may ever experience.

A bereavement in the family can be expected ie; where someone has been terminally ill for a long time. You maybe prepared for this ‘family bereavement’ to happen eventually – But that does not lessen that pain.

Or totally unexpected, which can naturally knock anyone sideways. We are only human, so trying to process this can be very very hard..

That over-riding grief, intense pain and emotion we then feel following on from the death of a family member who has been so close to us.

The hardest thing to remember at your worst time is that this grief state is not a permanent state. It will eventually pass when its purpose has been achieved. Although some people may need a support group for bereavement or professional help if it sadly deepens and persists.

Bereavement Leave in UK | How Long Bereavement Leave?

Check if your employer firstly has a bereavement leave uk policy for employees. For example

  • How long bereavement leave your organisation provides & when
  • If that leave is paid, and the amount of pay

This bereavement leave in uk terms might also be called ‘special leave’ ‘compassionate leave’ or ‘bereavement leave uk’.

An employee usually has a legal right to time off for a funeral for bereavement in the family – but often only if that person who died was also a dependant.

There’s often no legal right to time off for a funeral, if that person who died was not a dependant. However, your employer might offer time off.

In most circumstances, there maybe no legal right for this time off to be paid & how long bereavement leave…but some employers might offer some pay in their employment contract’s.

Employers and employees should always check the employee’s contract or organisation’s policy. The employer may even have a goodwill ‘insurance for funeral expenses’ payment?

If their employers does not offer paid time off for a funeral, then the employee and employer could always agree on using either unpaid leave or use up paid annual holiday.

Note: There is no single one way to grieve for a ‘family bereavement’. Every person is different. Every person grieves in his or her own way…. and there is no telling how long it will take.

Insurance Death & Disclosure

How would the Insurers even know if I just have the odd cigarette per week or maybe occasionally vape, when the Insurers ‘smoking rate premiums’ are that much more expensive – if I tell them I don’t ?

What happens if I didn’t tell the Insurers anyway about having a familial disease (what ever that means) as they are asking about me, not anyone else? “We just need to get a fair life insurance deal issued asap, as I am going away”.

”I am a busy person, so don’t usually bother seeing my doctor if I had any health issues, I just get on with life mate…but I am sure everything is all okay, so I don’t need to worry’.

The Insurers may not necessarily request any medical nurse tests or even write to your GP upfront, to query your insurance application when you apply.

However, they will probably do so if an insurance claim then comes in, to fully assess the validity of your situation re a claim.

When buying any type of death insurance, it is always based upon your honest disclosure at the time.

Note; Most Insurers should always send you a copy application (by e-mail or hard copy) of what you initially disclosed, for you to then carefully recheck. If you think anything is wrong, then you need to advise them asap.

The original death certificate once requested by the Insurers may then highlight that it was caused by ‘smoking related factors.’ Alternatively, it may point to the fact that a heart attack from someone at such an early age in their early 40’s was likely due to their ‘hereditary health history’ issue of familial heart disease.

The last thing your family & dependants would ever want, at their worst moments, is to have to be told by the Insurers’ the your death claim is now sadly invalid.unhappy face That the information you gave at the time was found inaccurate ie; misrepresentation.

Remember, if you were paying £26pm to ‘correctly insure’ or just £16pm ‘maybe incorrectly’ for £100,000 life insurance, then which is the smarter insurance move? Who has the GREATER RISKS ?

The Life Insurance Company who may have to pay out a £100,000 death insurance policy claim …..or your Family because they unfortunately didn’t !!!

UK Risk of Claim stats
Our risks for death insurance is….

What if my Health changes after taking the Death Insurance policy?

Any health or lifestyle changes since, usually does not void your existing ‘death insurance cover’, if it wasn’t relevant at that time of initial application.

It maybe the Insurers request GP reports when you originally applied, to check any health details disclosed. Likewise they may not.

So take care to doubly re-check on your original application what you initially disclosed to the Insurers, as this information then stands now and in the future. Please check your original uk death benefit T&C’s.

Which is the Best UK Death Insurance?

  • There is no set answer to this question, as given the various types of insurance for death, the devil is really in the detail.
  • What type of policy is actually required ie; protection cover for your Mortgage, Debts, Bills, Family, Legacy or Funeral Costs etc;
  • Or you have health issues, your job or pastimes are considered a higher insurance risk, then each Insurer may view & charge differently
  • So the cheapest Insurance for death cover isn’t necessarily the best, as it may have age costed annually reviewed increasing premiums
  • Ignore some advertised Insurance with Free Gifts deals, as they generally could be £1,000’s more lifetime expensive

Conclusion on what Death Insurance is

I hope that gives a brief background as to different types of what death insurance is, and why you should consider taking cover out. Nobody is invincible….

Please check out & Compare Online Broker only deals here.

If family members are dependant on you, then you know it makes good sense

Article on ‘Insurance for death’ cover by Martyn Spencer Financial Adviser (2024)

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