What are the benefits of life insurance?

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April 19, 2021

When it comes to the subject of life insurance, most people will probably be aware of the key benefits of life insurance and how it offers peace of mind for your family and children in the event of your death.

While you might be aware of some of the main advantages of life insurance, there are perhaps other pros that you should be aware of in order to be fully confident with your policy.

What is life insurance? How does it all work?

Life insurance is something that you can pay into in the form of monthly premiums and in the event of your death, your insurance provider will pay out a lump sum to your family, or the beneficiaries of your choice.

Depending on the type of life insurance policy you have and any terms and conditions that are in place, your beneficiaries are usually free to spend the money however they see fit, with many people using it to pay for things like funeral costs or your mortgage upon your death.

Life insurance benefits

There are many benefits of having a life insurance policy in place, with one of the best reasons being that you know your family will be taken care of financially if something happens to you, but there are also many other benefits of life insurance that you should know about too.

  • Income protection for loss of earnings and income protection for years of lost salary in the event you’re unable to work
  • Tax advantages of life insurance - death benefits are usually tax-free so you can transfer money to your beneficiaries with fewer tax liabilities (such as inheritance tax)
  • It can help to pay off unpaid debts such as your mortgage
  • Help to cover the cost of a funeral
  • Life insurance payouts can provide financial security for your loved ones and ensure that they are taken care of and looked after upon your death
  • You can add bundles such as critical illness cover to your policy in order to support you and your family towards the end of your life

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Other types of life insurance and their benefits

While of course, you can opt to get a standard life insurance policy, you might also want to think about some of the more specific life insurance policies like the ones listed below.

Whole life insurance

A whole life insurance policy is exactly what it says in its name; it lasts for the entirety of your life and it guarantees that your insurance provider will pay out a lump sum to your beneficiaries when you die, rather than just during a specific period of time.

Level term life insurance

This type of cover pays out a cash lump sum if you die within the period of your life insurance policy. It can be used to pay off any unpaid debts that you might have had upon the time of your death, so your loved ones have peace of mind that your financial situations will be paid for.

Decreasing life insurance

Decreasing life insurance is usually taken out in order to ensure that your mortgage payments are met in the event of your death.

With this kind of life insurance policy, the gradually-reducing amount of mortgage debt that you have will be in line with your decreasing life insurance policy; so the more you pay off your mortgage, the less the payout will be as it decreases in accordance with the diminishing size of your mortgage debt.

Read more: Level term VS decreasing term life insurance

Over 50s life insurance

There are many age-specific life insurance policies to think about, with one of the most common ones being over 50s life insurance. At this age, many people start thinking about their later life, so if you want to ensure the financial security of your family in the event of your death, it might be a good idea to look into over 50s life insurance. 

This way, you can be in control of your family’s financial future and help to pay towards your own funeral costs, for example.


Some people like to put their life insurance in trust, which means it will not count towards your estate upon your death and it will no longer be subject to inheritance tax (IHT).

While this type of life insurance sounds very attractive at first, it can be quite complicated to put into place and you may need to seek the help of a financial expert in order to determine whether it will be the best option for you and your family.

Learn more: A guide to putting your life insurance in trust

How to get more benefits with your life insurance policy

It’s often advised that you should take out life insurance when you’re young, fit and healthy so that you can benefit from cheaper premiums as insurance providers deem you as more likely to live longer, less likely to be diagnosed with a serious disease and you’ll also pay premiums for much longer, which is a great advantage to the insurer.

However, these benefits are also suited towards you as the insurance purchaser as you’ll more than likely be able to find cheaper insurance.

In order to get the most benefits out of your life insurance policy, you’ll need to work out the level of cover you want and compare many quotes from different providers in order to get the best possible policy for the best price. 

You may also want to consider adding things called ‘riders’ to your policy so that you’re covered for other eventualities. One popular ‘rider’ is known as a disability waiver of premium which gives you the ability to stop paying for your life insurance premiums if you have a disability during the term of your coverage.

Life insurance can be quite overwhelming if you’re not sure about the kind of policy you want or need. It’s important to research the type of policy you might want, along with the benefits of each policy in order to determine which one is best suited to you and your family once you die.

To save time and hassle, get professional advice from a life insurance broker, like Bobatoo.

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