# Life Insurance

> How life insurance works, the difference between term and whole-of-life cover, writing a policy in trust and the FSCS protection for long-term insurance.

Canonical page: [/insurance/life-insurance](/insurance/life-insurance/) · Last reviewed: 2026-08-22

Life insurance pays out a sum of money if you die during the term of the policy, giving financial support to the people who depend on you. Here are the main options to understand.

## Key information

- Pays a lump sum (or income) to your beneficiaries if you die while covered
- Term cover runs for a set period; whole-of-life cover lasts for life
- Writing a policy in trust can help keep the payout outside your estate
- Long-term insurance such as life cover is protected 100% by the FSCS if the insurer fails

## Types of life cover

Term life insurance covers you for a fixed period — for example the length of a mortgage — and pays out only if you die within that term. Whole-of-life insurance has no end date and is designed to pay out whenever you die, which makes it more expensive. Within term cover you can choose a level sum that stays the same, or decreasing cover that falls over time to track [a repayment mortgage](/mortgages/first-time-buyer-mortgages).

- Level term — a fixed payout for a fixed period
- Decreasing term — the payout reduces over time, often used alongside a repayment mortgage
- Whole-of-life — cover with no fixed end date, designed to pay out eventually

## How much cover you might need

There is no single right answer. People often think about clearing a mortgage, replacing lost income for a partner or children, and covering funeral or childcare costs. The right amount and term depend on your circumstances, so this is general information rather than personal advice — a [regulated adviser](/investing-pensions/checking-a-financial-firm) can recommend what is suitable for you.

## Writing a policy in trust

Putting a life insurance policy into trust means the payout can go directly to your chosen beneficiaries rather than forming part of your estate. This can speed up payment and may help with inheritance tax planning. It is usually free to set up when you take out the policy, but the right approach depends on your situation, so consider professional advice.

## Your rights

- Long-term insurance, including life cover, is protected at 100% by the Financial Services Compensation Scheme with no upper limit if the insurer fails (for firms that failed on or after 3 July 2015).
- You must take reasonable care to answer the insurer’s health and lifestyle questions honestly when you apply.
- This page is general information, not regulated financial advice; for a personal recommendation, speak to an FCA-authorised adviser.

## Official sources

- [How the FSCS protects insurance](https://www.fscs.org.uk/what-we-cover/insurance/)
- [Check a firm on the FCA Register](https://register.fca.org.uk)
- [Financial Ombudsman Service](https://www.financial-ombudsman.org.uk)

## Related

- [Income Protection & Critical Illness](/insurance/income-protection-and-critical-illness/)
- [Health Insurance](/insurance/health-insurance/)
- [Making a Claim](/insurance/making-a-claim/)
- [Complaints & Rejected Claims](/insurance/complaints-rejected-claims/)
- [Firm Checker](/tools-calculators/firm-checker/)
- [FSCS protection explained](/banking-savings/fscs-protection/)

## Sources

- FSCS — [Insurance protection & compensation](https://www.fscs.org.uk/what-we-cover/insurance/) (accessed 2026-08-22)
- MoneyHelper — [Life insurance](https://www.moneyhelper.org.uk) (accessed 2026-08-22)
- ABI — [Protection insurance](https://www.abi.org.uk) (accessed 2026-08-22)