If the worst happened, would your family be OK?

What it is actually for

Life insurance pays a lump sum if you die during the term of the policy. That is the whole product.

What it is for is more useful to think about: it is for the people who would still have to pay the mortgage, feed the children and keep the lights on without you. It is not for you. You will never see a penny of it, which is why it is one of the easiest things in the world to put off.

The question worth sitting with is not "do I need life insurance". It is "if my income stopped permanently tomorrow, what would happen to the people who rely on it, and for how long could they manage".

Most people have never worked that out. It usually takes ten minutes and it changes the conversation.

Level or decreasing cover

Level cover stays the same throughout the policy. The amount you start with is the amount paid out, whether that is in year one or year twenty. It suits a debt that is not reducing, like an interest-only mortgage, and it suits anyone who wants to leave something beyond clearing the house.

Decreasing cover starts higher and reduces over time, roughly tracking a repayment mortgage. Premiums are generally lower than level cover for the same starting figure, because the insurer's exposure falls each year.

Neither is better. They do different jobs. The thing to avoid is buying decreasing cover against an interest-only mortgage, where the debt stays put while the cover shrinks.

Single or joint?

A joint policy covers two people and pays out once, on the first death. It is usually the cheaper option and it is simple.

Two single policies cost more and pay out twice if both people die during the term. They also stay with each person if the relationship ends, which a joint policy does not do neatly.

For couples with a mortgage, both are common, and the right answer depends on budget, circumstances and how much you care about what happens if things change. It is worth five minutes rather than ticking the box the form puts first.

How much, and for how long

The mortgage is the usual anchor: the balance outstanding and the years left on it. Sensible, and often not the whole picture.

Also worth counting:

• Childcare and school costs, which do not stop
• Other debts that would fall to someone else
• The income that would be lost, not just the debt
• Cover you already have. Death in service through an employer is common, usually a multiple of salary, and it ends when the job does

On term, people often set it to the mortgage and forget that children stay expensive for years after the house is paid for.

Writing a policy in trust

The bit nobody mentions and almost everyone benefits from understanding.

A policy written in trust generally pays to the people you have named rather than into your estate. In practice that usually means the money reaches them faster, without waiting for probate, and it can sit outside your estate for inheritance tax purposes.

Whether a trust is right, and which kind, depends on your circumstances, and the rules can change. It is normally far easier to set up at the start than to arrange later, and for anything involved your solicitor should be in the conversation. I will raise it with you either way, because leaving it out is one of the most common gaps I see on policies people bought online.

Health, honesty and why the application matters

Insurers ask about your health, your family history, your job and your habits, and they price accordingly. Nobody enjoys the questions.

Answer them fully anyway. An insurer can decline a claim, or pay only part of it, where something was not disclosed, and the person dealing with that is not you. It is your family, at the worst possible moment, holding a policy that does not pay.

If you have a health condition, cover is often still available. Sometimes at a higher premium, sometimes with an exclusion, occasionally through an insurer that takes a different view of that particular condition. The answer is to declare it and let me find the insurer whose underwriting fits, not to hope nobody checks.

Where this sits with your other cover

Life insurance pays out if you die. It does nothing if you survive something serious, which is where critical illness cover comes in, and nothing if you simply cannot work for a long period, which is income protection. The two can be bought together as life and critical illness cover.

If you are a company director, there may be a route to arranging life cover through your business rather than personally. See relevant life plans.