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Five things you need to think about before taking out life insurance

Mon 13 Mar 2023

Losing a loved one can have devastating financial consequences but having life insurance could really help in difficult times.

We know it’s not a nice thing to think about, but providing some financial protection could help your loved ones deal with the grief, stress and unexpected costs that death could bring.

Here are five things to think about before taking out life insurance:

1) Work out what cover you need

To see how much cover your family will need, start by looking at your monthly outgoings, (mortgage/rent, bills, debt repayments) and how much you contribute towards these. Then look at the costs involved following a death. According to a recent SunLife Cost of Dying report, the average cost of a funeral is currently £3,953. Having a life insurance policy not only provides financial protection for your loved ones, but could also help them pay for any costs associated with a funeral.

A life insurance policy provides a lump sum or regular income to your loved ones if you die whilst covered. There’s usually no income or capital gains tax to pay on the proceeds of the policy. However, if the total value of your estate is more than £325,000, inheritance tax (IHT) may be deducted from your insurance payout. For more information, visit

2) Adjust for future inflation

Inflation typically makes household bills more expensive over time, so it’s worth considering this when looking at the amount of cover you need. For example, a pint of milk in 2000 cost 35p and yet today costs around 97% more at 69p*. When looking at the different types of life cover available, you may want to consider policies that provide 'increasing cover' where the amount payable on death increases each year in line with inflation.

3) Affordability

Look at what type of insurance you really need as there can be a huge difference in prices for example a ‘whole of life’ insurance policy can cost more than a policy that covers a specific term. The important thing is to consider which cover is right for you, ensuring that you can afford to pay the monthly payments.

4) What sort of payout do you want?

It’s also important to consider how to replace a regular income when someone dies. Most life insurance policies pay a single amount of money on death, whilst a Family income benefit insurance can pay out a regular income until the policy ends.

5) Speak to a trusted Protection Advisor

It’s important to get the right cover that meets your needs. Life insurance usually only covers death, so if you want protection that covers your income or illness then you’ll need to consider other protection policies that can do this.

If you're not sure which life insurance policy would be right for you, then it's worth seeking financial advice. A Financial Adviser will charge for this advice so it's worth asking them about any costs upfront.

Find an adviser

*Source: Office for National Statistics, SunLife cost of dying report 2023

Police Mutual is a trading style of The Royal London Mutual Insurance Society Limited. The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm is on the Financial Services Register, registration number 117672. Registered in England and Wales number 99064. Registered office: 80 Fenchurch Street, London, EC3M 4BY.

Type of article: Articles
Category: Protecting my family

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