How Much Should I Pay for Life Insurance?

When people ask how much life insurance costs, what they’re usually asking is something slightly different: what’s a reasonable amount to pay for peace of mind?

Life insurance isn’t a one-price-fits-all product. The monthly cost can vary widely depending on age, health, lifestyle, and what you want the policy to do. Understanding how those factors fit together makes it much easier to judge whether a quote feels fair, or whether you’re paying for cover you don’t actually need.

How Does Life Insurance Work?

A life insurance policy pays out a cash sum if you die during the policy term. That payout is known as the sum assured, and it’s usually paid as a lump sum to your chosen beneficiaries.

Many policies also include a terminal illness provision, meaning the payout can be made early if you're diagnosed with a terminal illness (less than 12 months months to live) during the term.

You pay an insurance premium, typically monthly, for the length of the policy. If you outlive the term, the policy simply ends with no payout. That’s not a failure of the policy. It means the cover did its job while it was needed.

Some policies also include options like critical illness cover, which pays out if you’re diagnosed with a serious condition such as cancer, a heart attack, a stroke or another qualifying illness.

How Much Is Reasonable to Pay for Life Insurance?

For many people in the UK, life insurance costs less than they expect. Looking at the average cost of life insurance can help put quotes into perspective before deciding what feels reasonable.

As a rough guide:

• Younger applicants in good health may pay only a few pounds per month

• Costs rise with age, longer policy lengths, and higher cover amounts

• Adding critical illness cover increases the monthly premiums, sometimes significantly

What matters most is not the headline price, but whether the cover matches your situation. A lower monthly cost is only good value if the policy would actually support the people you care about.

Average Cost of Life Insurance in the UK

There’s no single “average” price, but insurers price policies based on risk. Factors that influence life insurance rates by age include:

• Age at application

• Length of the policy

• Health and lifestyle, including smoking status

• Medical history, including any pre-existing medical condition

• Occupation and hobbies

• Body mass index (BMI)

A healthy person in their 30s taking out a level term life insurance policy may pay far less than someone in their 50s applying for the same cover.

How Much Cover Do You Need?

The right cover amount depends on what the policy is meant to do.

Common reasons people take out life insurance include:

• Paying off a mortgage

• Replacing lost income

• Covering funeral costs

• Supporting children or dependants

• Planning for inheritance tax

If the policy is linked to a mortgage, mortgage life insurance is often arranged as decreasing term cover, where the payout reduces over time in line with the loan. If the aim is broader family support, level term cover or a family income benefit may be more appropriate.

Single vs Joint Life Insurance: Does the Cost Differ?

A single life policy is taken out in one person’s name and pays out if that individual dies during the term. A joint life policy, by contrast, is shared between two people and most commonly pays out when the first person dies.

Because there’s only one policy and one payout, joint cover often works out cheaper than taking out two separate plans. That’s why many couples choose it, particularly when the main aim is to protect a mortgage. The trade-off is that once a claim is paid, the policy stops. If the surviving partner still needs cover after that point, they’ll need to arrange something new.

Typical Life Insurance Payouts in the UK

There’s no “typical” payout, as the average payout reflects the cover chosen. 

Some policies are taken out with a very specific goal in mind, such as clearing a mortgage, so the family home isn't put at risk. Others are there to soften the financial impact over time, whether that’s covering day-to-day costs for a while or giving a family room to adjust.

In most cases, life insurance pays out as a lump sum. That flexibility matters. It allows the person receiving the money to deal with whatever feels most urgent at the time, rather than being locked into a single use.

Does Life Insurance Cover Suicide?

Most UK life insurance plans include a suicide clause. If death occurs within the first 12 months of the life insurance plan as a result of suicide, the insurance company usually refunds premiums rather than paying the full sum assured. After that period, the policy generally pays out as normal.

How Much Does a Funeral Cost?

Funeral costs in the UK often run into several thousand pounds. Many people take out over 50s life insurance specifically to cover these expenses, so loved ones aren’t left dealing with immediate bills at a difficult time.

An over 50s plan usually comes with guaranteed acceptance but may include a waiting period before the full payout applies.

Decreasing Term vs Whole of Life Insurance

• Decreasing life insurance is usually cheaper and commonly used for mortgages
   

• Whole of life insurance lasts for life and guarantees a payout, provided premiums are maintained

Whole of life policies cost more, but they’re sometimes used for funeral planning or inheritance tax mitigation rather than income replacement.

What Affects the Price the Most?

The biggest influences on cost tend to be:

• Age at application

• Policy length

• Cover amount

• Medical conditions, including any heart condition, chronic illness, or previous acute condition that may affect risk

• Lifestyle factors such as smoking

• Whether critical illness cover is included

A policy taken out earlier in life is almost always cheaper than waiting until cover feels urgent.

Is Life Insurance Worth It in the UK?

For many people, yes. Life insurance is about reducing financial pressure at the worst possible time. Whether it’s clearing a mortgage, replacing income, or simply covering final expenses, the value lies in what it prevents, not just what it pays.

A More Realistic Way to Think About Cost

For many people, the first step is simply getting a rough sense of the numbers, and that's where a life insurance calculator can help.  It gives you a sense of the ballpark figures and shows how things like your age, the amount of cover, or the length of the policy can change the price.

It’s not a decision-maker on its own, but it can be a useful way to understand what’s driving the cost before you look any deeper.

But figures on a screen only go so far. Two policies that cost the same each month can work very differently once you look beyond the headline number. Details like exclusions, how flexible the cover is, and what actually happens at claim stage all make a difference.

The aim usually isn’t just affordability, but confidence that the cover would still make sense if it ever had to be used.

This is where speaking to insurance experts can help.

At Cavendish Online, life insurance options are discussed in context, looking at what the policy is meant to achieve rather than just how much it costs.