The UK’s Most Popular Types of Life Insurance in 2025

Navigating the world of life insurance can feel like trying to read a map in a foreign language. With so many products, terms, and options, it’s easy to feel overwhelmed. Yet, at its core, life insurance is one of the most profound financial decisions you can make—an act of care that provides a safety net for the people you love most.

As we move through 2025, the need for this financial security has never been more apparent. The rising cost of living, significant mortgage debts, and a greater awareness of our own vulnerability have brought the importance of planning for the unexpected into sharp focus. The good news is that the UK insurance market is mature and diverse, offering a range of solutions tailored to different life stages, budgets, and needs.

This guide is designed to be your definitive resource, demystifying the UK's most popular types of life insurance. We will explore the three main pillars of personal protection—Term Life Insurance, Whole of Life Insurance, and Over 50s Plans—breaking down how they work, who they’re for, and how to choose the right one for you. Whether you're a new parent, a homeowner, a business director, or planning your estate, understanding these options is the first step towards securing lasting peace of mind.

A breakdown of term, whole of life, and over 50s plans

At first glance, all life insurance might seem the same: you pay a monthly premium, and in return, your loved ones receive a lump sum when you die. However, the devil is in the detail. The type of policy you choose determines how long you’re covered, whether a payout is guaranteed, and how much it will cost.

The three most popular choices in the UK each serve a distinct purpose:

1. Term Life Insurance: The workhorse of life insurance. It covers you for a fixed period (the 'term') and is primarily designed to cover debts and financial obligations that have a clear end date, like a mortgage or the years you're raising your children. It's popular because it's simple and affordable.
2. Whole of Life Insurance: A premium, lifelong product. This covers you for your entire life, meaning a payout to your beneficiaries is guaranteed whenever you die, as long as you've kept up with your premiums. It's often used for inheritance tax planning or to leave a guaranteed legacy.
3. Over 50s Life Insurance: A specialist plan offering guaranteed acceptance. Designed for UK residents aged 50 and over, it provides a smaller, fixed lump sum to help cover funeral costs or leave a small gift. Its main selling point is that there are no medical questions.

Here’s a quick comparison to get us started:

Now, let's dive deeper into each of these cornerstone policies.

Term Life Insurance: Your Flexible Foundation

Term life insurance is, by a significant margin, the most common type of life insurance sold in the UK. Its popularity lies in its straightforward and cost-effective nature. It’s a pure protection product: it pays out if you die during the policy's term and has no investment element or surrender value.

Think of it like car insurance; you pay for cover for a year, and if you have an accident, it pays out. If you don't, the policy expires, and you've had the peace of mind of being protected. Term life insurance works the same way, but over a much longer period—typically anywhere from 5 to 40 years.

The Main Types of Term Life Insurance

Not all term insurance is the same. It comes in three main flavours, each suited to different financial goals.

1. Level Term Life Insurance

With a level term policy, the amount of cover (the lump sum payout) and your monthly premiums are fixed for the entire duration of the policy.

• Example: Sarah and Mark, both 35, have two young children and an interest-only mortgage of £300,000 with 25 years remaining. They take out a joint level term policy for £300,000 over 25 years. If either of them dies within that 25-year period, the surviving partner receives £300,000. This could be used to clear the mortgage and provide a financial cushion. If they both survive the term, the policy ends, and no payout is made.

Best for:

• Covering an interest-only mortgage.
• Providing a fixed lump sum for your family to live on, replacing your income.
• Covering potential education costs for children.

2. Decreasing Term Life Insurance

Also known as mortgage protection insurance, this is the go-to option for covering a repayment mortgage. With a decreasing term policy, the amount of cover reduces over the policy's term, broadly in line with how a repayment mortgage balance decreases over time.

Because the potential payout gets smaller each year, the premiums for decreasing term insurance are cheaper than for level term insurance.

• Example: Chloe, 28, has just bought her first flat with a £200,000 repayment mortgage over 30 years. She takes out a decreasing term policy for the same amount and term. If she were to die 10 years into the policy, the payout would have decreased to roughly match the outstanding mortgage balance at that time, allowing her family to pay it off without financial stress.

Best for:

• Covering a repayment mortgage (the most common type of mortgage in the UK).
• Covering other long-term loans where the balance reduces over time.

3. Increasing Term Life Insurance

This is a more specialist type of term cover where the payout amount increases each year to combat the effects of inflation. The increase is usually linked to an inflation measure like the Retail Price Index (RPI) or a fixed percentage (e.g., 5% per year). Your premiums will also rise over the term to reflect the growing level of cover.

While more expensive, it ensures that the future payout has the same purchasing power as it does today. A £200,000 lump sum might seem huge now, but in 20 years, its real value will be significantly less.

Best for:

• Protecting your family’s future lifestyle against inflation.
• Providing a fund that grows over time to cover rising costs, such as university fees.

Summary Table: Comparing Term Insurance Types

Whole of Life Insurance: A Legacy for a Lifetime

Where term insurance provides a safety net for a specific period, whole of life assurance provides permanent protection. As the name suggests, it covers you for your entire life. As long as you continue to pay your premiums, a payout upon your death is guaranteed.

This guarantee makes it a fundamentally different product from term insurance and, as a result, significantly more expensive. It's less about covering temporary debts and more about creating a lasting financial legacy.

Why Choose Whole of Life?

People typically choose whole of life cover for one of two main reasons: to leave a definite inheritance or to plan for inheritance tax (IHT).

1. Leaving a Guaranteed Legacy

A whole of life policy can provide a fixed, tax-free sum to your children, grandchildren, or a chosen charity, regardless of when you die. It’s a powerful way to ensure you leave something meaningful behind, separate from your other assets like property or pensions.

2. Inheritance Tax (IHT) Planning

This is the most common and strategic use for whole of life insurance. In the UK, if the value of your estate (your property, money, and possessions) is above a certain threshold when you die, it will be subject to a 40% tax.

• The 2025 IHT Thresholds: The main nil-rate band is £325,000 per person. You may also be eligible for the residence nil-rate band of £175,000 if you pass your main home to direct descendants. For a married couple or civil partners, these allowances can be combined, potentially allowing up to £1 million to be passed on tax-free.

However, with property prices remaining high, many more families are finding their estates liable for IHT. The Office for Budget Responsibility forecasts that IHT receipts will rise to £9.8 billion by 2028-29.

A whole of life policy, when written in trust, can be the perfect solution. Writing a policy in trust legally separates it from your estate. This means:

1. The payout is not added to your estate's value, so it doesn't increase the IHT bill.
2. The money is paid directly to your chosen beneficiaries, avoiding the lengthy and complex probate process.
3. Your beneficiaries can use the tax-free payout to pay the IHT bill, ensuring that assets like the family home don't need to be sold to settle the tax liability.

An expert broker, like WeCovr, can guide you through the process of writing a policy in trust, which is usually free and straightforward.

Reviewable vs. Guaranteed Premiums

Whole of life policies come in two main premium structures:

• Guaranteed Premiums: Your monthly payments are fixed at the start and will never change. This provides certainty but comes with a higher initial cost.
• Reviewable Premiums (Maximum Cover): Premiums start lower, making the policy seem more affordable. However, the insurer reviews them at regular intervals (e.g., every 5 or 10 years). As you get older and the risk of a claim increases, these premiums can rise substantially, sometimes becoming unaffordable later in life. This option carries significant risk and should be considered with extreme care.

For most people seeking certainty, guaranteed premiums are the more prudent choice.

Over 50s Life Insurance: Simple, Guaranteed Acceptance

An Over 50s plan is a specific type of whole of life policy designed for simplicity and ease of access. It’s aimed at UK residents, typically between the ages of 50 and 85, who are looking for a small amount of cover, often to pay for their funeral.

The standout feature of an Over 50s plan is guaranteed acceptance.

• No Medical Questions: You will not be asked about your health, medical history, or lifestyle. Acceptance is guaranteed within the eligible age range.
• No Medical Exam: You won't need to see a doctor or have any tests.

This makes it an accessible option for those who might have pre-existing health conditions that would make traditional life insurance expensive or even unobtainable.

How Over 50s Plans Work

In exchange for this guaranteed acceptance, these plans have some unique features:

1. The Moratorium Period: The policy will not pay out the full cover amount if you die from natural causes within the first 12 or 24 months (this varies by insurer). Instead, your beneficiaries will receive a refund of the premiums you've paid, sometimes with a small amount of interest (e.g., 150% of premiums paid). However, death by accident is usually covered in full from day one.
2. Fixed Payout: The lump sum is relatively small, typically ranging from £1,000 to £20,000. It's designed to cover final expenses, not large debts. The average cost of a basic funeral in the UK was £4,141 in 2023, according to SunLife's Cost of Dying Report, and is projected to rise.
3. Fixed Premiums: Your monthly payments are fixed for life and will never increase.

Is an Over 50s Plan Right for You?

These plans can be a good solution, but it’s vital to understand the trade-offs.

Pros:

• Incredibly easy to set up.
• Provides peace of mind that funeral costs are taken care of.
• Guarantees you can leave a small cash gift to loved ones.

Cons:

• Value for Money: If you live for a long time, you could end up paying more in premiums than the final payout amount. For example, if you take out a £5,000 policy at age 55 for £20 a month and live to be 90 (35 years), you would have paid £8,400 in premiums.
• Limited Cover: The payout is not designed to clear a mortgage or provide a family income.
• Inflation: The fixed cash sum will lose purchasing power over time.

For healthier individuals, a small traditional whole of life or term policy may offer better value. It’s always worth comparing your options.

Summary Table: Over 50s vs. Traditional Whole of Life

Beyond the Big Three: Other Essential Protection Policies

While term, whole of life, and over 50s plans form the core of life insurance, a comprehensive financial safety net often includes protection against illness and loss of income. These are not 'types' of life insurance, but separate policies that are often bought alongside them.

Critical Illness Cover (CIC)

Critical illness cover pays out a tax-free lump sum if you are diagnosed with one of a specific list of serious illnesses defined in the policy. The 'big three' covered by nearly all policies are cancer, heart attack, and stroke, but modern policies can cover over 50 different conditions.

The payout is designed to remove financial stress at a time when you should be focusing on recovery. It could be used to:

• Clear a mortgage or other debts.
• Pay for private medical treatment.
• Adapt your home.
• Replace lost income for a period.

CIC can be purchased as a standalone policy or, more commonly, combined with life insurance (so the policy pays out on either diagnosis of a critical illness or death, whichever comes first).

Income Protection Insurance (IP)

Often described by financial experts as the most important protection policy of all, income protection provides a regular, tax-free monthly income if you are unable to work due to any illness or injury.

Unlike CIC's one-off lump sum, IP is designed to replace a portion of your salary (usually 50-65%) and can pay out until you either return to work, retire, or the policy term ends. This protects your entire lifestyle—your ability to pay the mortgage, bills, and everyday living costs.

Given that Statutory Sick Pay is just £116.75 per week (2024/25 rate), which is insufficient for most people to live on, IP is a vital consideration, especially for the self-employed and company directors who have no employee benefits to fall back on.

• For Business Owners: Specialist policies like Executive Income Protection can be paid for by your limited company as a business expense, making it a highly tax-efficient way to protect your personal income.

Family Income Benefit (FIB)

This is a variation of term life insurance. Instead of paying a single lump sum upon death, it pays out a regular, tax-free monthly or annual income to your family for the remainder of the policy term.

This can be easier for a bereaved family to manage than a large lump sum, as it directly replaces the lost monthly salary and simplifies budgeting during a difficult time. It is also often cheaper than an equivalent lump sum policy.

Making the Right Choice: Factors to Consider in 2025

Choosing the right policy is a personal decision based on your unique circumstances. Here are the key factors to consider:

1. Your Life Stage & Dependents:

   • Young Family: Your priority is likely protecting your children and partner until the kids are financially independent. A combination of decreasing term (for the mortgage) and level term or family income benefit (for living costs) is often a great starting point.
   • Homeowner: A decreasing term policy that matches your mortgage is the absolute minimum protection you should consider.
   • Nearing Retirement: Your children may be independent and your mortgage paid off. Your focus might shift to IHT planning with a whole of life policy or securing funds for your funeral with an over 50s plan.

2. Your Financial Liabilities:

   • Make a list of your debts: mortgage, car loans, credit cards, and business loans.
   • Calculate your family's monthly expenses.
   • Use this to determine the amount of cover you need. A common rule of thumb is 10 times your annual salary, but a bespoke calculation is always better.

3. Your Budget:

   • Be realistic about what you can afford. Some cover is always better than no cover. A simple decreasing term policy can cost less than a few coffees a month.
   • An independent adviser can help you find the best value for your budget. At WeCovr, we help our clients compare plans from all the major UK insurers to find the right balance of price and quality.

4. Your Health & Lifestyle:

   • Your age, health, smoking status, and occupation all impact your premiums. Insurers reward a healthy lifestyle.
   • Being proactive about your health can lead to lower premiums in the long run. To support our clients on their wellness journey, WeCovr provides complimentary access to our AI-powered calorie tracking app, CalorieHero, demonstrating our commitment to your long-term wellbeing.

How to Get the Best Value on Your Life Insurance Policy

Securing the right policy isn't just about finding the cheapest premium; it's about finding the best value.

• Speak to an Independent Adviser: A broker has access to the whole market and can provide impartial advice. They will understand the nuances between different insurers' policy definitions (especially crucial for critical illness cover) and help you with the application and trust forms.
• Be Completely Honest: When applying for medically underwritten insurance, you must disclose your full medical history. Failing to do so is known as 'non-disclosure' and can lead to your policy being voided, meaning your family would receive nothing.
• Write Your Policy in Trust: As we've discussed, this simple step ensures a fast, tax-efficient payout for your beneficiaries. It's a non-negotiable part of good financial planning.
• Review Your Cover Regularly: Life doesn't stand still. Getting married, having children, moving house, or getting a promotion are all key moments to review your protection to ensure it's still fit for purpose.

Conclusion: Securing Your Peace of Mind

Life insurance is a subject many of us prefer to avoid, but planning for the future is one of the most selfless things you can do. It's about ensuring that, should the worst happen, the people you leave behind are not burdened by financial worries at the most difficult of times.

In 2025, the UK market offers a solution for everyone:

• Term Insurance provides an affordable and flexible foundation for covering debts and protecting your family during their most dependent years.
• Whole of Life Insurance offers a permanent solution for leaving a guaranteed legacy and strategically managing inheritance tax.
• Over 50s Plans provide a simple, accessible way to cover funeral costs without the need for medical checks.

The right choice depends entirely on you. By understanding these core products and assessing your own needs, you can take a confident and empowered step towards protecting your family's future. To get a clear picture of what's right for your situation, speaking with a protection specialist is the best course of action.