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What is life insurance? The basics explained

Read this simple definition of what life insurance is and how it can provide for your family financially if the worst were to happen to you.

Term life insurance — understanding the basics

So, what is life insurance exactly? Very simply, it’s a type of insurance that pays out a sum of money if the insured person dies.

Just as car insurance aims to protect you financially if something happens to your car, life insurance protects your dependents financially, if the worst happens to you.

A popular type of life cover is term life insurance, it pays out a sum of money if you die during a specific timeframe that you set when you apply. This is the ‘term’ of the name and might be the years when your family is most dependent on you or the years when you have a mortgage to pay, or both.

Who needs life insurance and why

Do any of these situations apply to you? If so, life insurance could well be a good idea.

  • You have a mortgage or other debts
  • Others rely on you for money — a partner, children or other dependents
  • Others rely on you for care that would otherwise need to paid for — for example, young children

If you’re the wage earner of the household, having life cover means money can be there to help your family maintain the quality of life they currently enjoy.

And, life insurance can be just as important for stay at home parents, whose contribution to home life and childcare would have to be met somehow if they were to die.

How much life cover is enough

This will depend on what you can comfortably afford to pay for your life insurance and what you’d like the payout to help with. Maybe you’d like it to help pay off the mortgage or cover living costs while your family are getting back on their feet.

Use our life insurance calculator to see how much cover you might need based on your finances and lifestyle.

The cost of life insurance

Life insurance is generally paid for on a monthly basis — the amount you pay is called the ‘premium’. As long as you keep paying this premium when required the policy will pay out if you die within the term.

Because no two people are the same, how much you pay is determined by a variety of factors specific to you, including:

  • Your age
  • Your health and lifestyle
  • How long you want the cover for
  • The amount of cover you need
  • Whether or not you smoke

This information helps the insurance provider decide how much ‘risk’ you present to them. In other words, how likely is it that a claim will be made on your policy. The lower the likelihood the lower the premium may be and vice versa. This is why life insurance is usually cheaper the younger and healthier you are.

Things like existing health conditions and dangerous jobs can push premiums up and healthier choices like limiting alcohol consumption, not smoking, managing weight and regular exercise can help keep premiums down.

A family of four sitting under umbrellas on a hill

Applying for life insurance

When applying for life insurance it’s important to be honest and accurate. Incomplete or incorrect information on the original application is the most common reason for a claim not being paid out, so it’s crucial to make the effort to get it right.

What’s great is that applying for life insurance doesn’t have to be complicated or time consuming. Policies like SunLife’s Family Life Insurance make the process straightforward with no need to undergo a medical. Instead you answer questions about your health, medical history and lifestyle to get a quote and apply for cover.

There are 3 simple steps to applying for life cover with SunLife. Here’s what to expect:

  1. Provide information about yourself
    • Your name, date of birth and contact details
    • Your partner’s details if you’d like joint cover
    • Your answers to a simple health and lifestyle questionnaire
  2. Get a quote based on your choices
    • Choose the term you’d like cover for
    • Choose how much you’d like to pay each month or, how much cover you’d like paid out if you die
    • Choose to add optional critical illness cover to your policy
  3. Apply and get an instant decision
    • Check you’re happy with your quote and the policy terms and conditions
    • Complete the application form and get an instant decision
    • If you’re accepted, you’ll be covered straightaway

So, what is life insurance?

Ultimately, life insurance is peace of mind for you and your family.

Sadly, there’s not much you can do to prevent the emotional impact on loved ones if they lost you. But you can put in place a financial safety net to help them maintain the lifestyle they enjoy now.

SunLife offers a range of straightforward and affordable products including over 50s life insurance, funeral plans, life insurance, equity release, pet insurance, car insurance, home insurance, ISAs and Will writing services.

Here's the information that you need to know about who we are and the other companies that we work with in order to provide our products and services.

Who are SunLife? 

Phoenix Life Limited trades as SunLife and is the provider of the Guaranteed Over 50 Plan, SunLife Insurance and the life insurance policy payment option for Funeral Plans. Phoenix Life Limited’s registered office is at 1 Wythall Green Way, Wythall, Birmingham, B47 6WG (registered in England, no. 1016269). Phoenix Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority and is entered on the Financial Services Register (registration no. 110418). As part of SunLife’s commitment to quality service and security, telephone calls may be recorded.

SunLife Limited distributes financial products and services and is a company limited by shares, registered office: 1 Wythall Green Way, Wythall, Birmingham, B47 6WG (registered in England, no. 05460862). SunLife Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register (registration no. 769427).

You can contact us by post at SunLife, PO Box 1395, Peterborough, PE2 2TR or by phone on 0800 008 6060.

If you choose to add Funeral Benefit Option to your Guaranteed Over 50 Plan the funeral services are arranged and provided by Dignity Funerals Limited. Dignity Funerals Limited is a company registered in England and Wales No. 00041598. VAT registered No. 486 6081 14. 4 King Edwards Court, King Edwards Square, Sutton Coldfield, West Midlands, B73 6AP. Telephone No. 0121 354 1557. Fax No. 0121 355 808. Part of Dignity plc. A British Company. Dignity is not authorised or regulated for this activity by the Financial Conduct Authority or the Prudential Regulation Authority but is a member of the National Association of Funeral Directors.

Who provides the Funeral Plans?

The funeral services are arranged and provided by Dignity Funerals Ltd which is not authorised or regulated for this activity by the Financial Conduct Authority or the Prudential Regulation Authority but is a member of the National Association of Funeral Directors.

The life insurance policy that pays for your funeral will be provided by Phoenix Life Limited, trading as SunLife.

Who provides My Smarter (ISA)?

My Smarter (ISA) is provided by Scottish Friendly Asset Managers Limited. Authorised and regulated by the Financial Conduct Authority. Details can be found on the Financial Services register, registration No. 188832. Member of The Investment Association. Registered Office: Scottish Friendly House, 16 Blythswood Square, Glasgow G2 4HJ.

Who provides the Will writing services?

Hugh James is authorised and regulated by the Solicitors Regulation Authority (SRA Number:303202).

The information contained on this website is based on Hugh James' understanding of the law of intestacy in England and Wales only as at April 2014. The law in Scotland and Northern Ireland is significantly different. This is for information purposes and is not intended to be legal advice.

Who provides Family Life Insurance?

SunLife Family Life Insurance is provided by Scottish Friendly Assurance Society Limited which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Details can be found on the Financial Services register (registration number 110002). Registered Office: Scottish Friendly House, 16 Blythswood Square, Glasgow G2 4HJ. 

Who provides SunLife Pet Insurance

SunLife Pet Insurance is arranged and administered by BDML Connect Limited. BDML Connect Limited is authorised and regulated by the Financial Conduct Authority (No. 309140). Registered in England and Wales Number 02785540. Registered Office: 45 Westerham Road, Bessels Green, Sevenoaks, Kent, TN13 2QB.

Who provides SunLife Home Insurance

SunLife Home Insurance is arranged and administered by BISL Limited and underwritten by a panel of insurers. BISL Limited are an intermediary authorised and regulated by the Financial Conduct Authority. Registered in England no. 03231094. Registered office Pegasus House, Bakewell Road, Orton Southgate, Peterborough PE2 6YS.

Who provides SunLife Car Insurance

SunLife Car Insurance is arranged and administered by BISL Limited and underwritten by a panel of insurers. BISL Limited are an intermediary authorised and regulated by the Financial Conduct Authority. Registered in England no. 03231094. Registered office Pegasus House, Bakewell Road, Orton Southgate, Peterborough PE2 6YS.