Money Expert > Life Insurance > Different Types of Life Insurance Policy
Have a look at different policy types and choose the one that works well for you
Last updated: 24/10/2025 | Estimated Reading Time: 6 minutes
Life insurance allows people to take ease in the knowledge that their dependents will be financially supported in the case of their death.
There are a huge variety of life insurance policies that one can take out and trying to choose between them can often be overwhelming. Everybody's needs are different so it is important to understand how the different types of cover work before you compare life insurance policies and decide on one for yourself.
The two core forms of life insurance are "term" insurance and "whole of life" insurance.
Term insurance is the most commonly chosen type of insurance. This type of insurance will cover you for an agreed upon amount of time, after this time the policy simply stops and you receive no payment.
Whole of life insurance can also be referred to as whole of life assurance. If you take out this type of policy, you are assured of a payment at some point. As the name suggests, whole of life insurance covers you no matter when you die. The price for this type of insurance is normally higher than it would be for term cover.
There are a few different types of term insurance available and each has its own positives and its own set of drawbacks:
Level term insurance will give your dependents one predetermined lump sum if you pass away during the agreed upon term. This amount does not change over time and stays the same throughout the entire length of the policy. This type of insurance is called "level term insurance" because the amount stays at the same level throughout.
There are plenty of people who want an insurance policy that will not lose value over time due to rising levels of inflation. If you are one of those people, then you may want to consider signing up to an increasing term insurance plan. These types of plan are either tied to inflation to make sure that the real term value of the sum stays the same no matter the economical climate, or they increase by a fixed amount each year.
With these types of policies the sum total paid out increases each year but the premiums do so too, therefore it is important to be aware that the cost of this insurance will go up each year.
Not all brokers that MoneyExpert work with offer increasing term life insurance.
Decreasing term insurance is best for people who want their life insurance plan to be able to pay off an existing debt that will be decreasing over time. Debts like mortgages can be a huge burden for the dependents of those who took them out, should the borrower pass away.
If you decide to take out this form of insurance, the payout will decrease over time so the premiums will be lower than for other types of life insurance.
This form of life insurance is known as convertible term insurance. This name is given to term life insurance policies that allow its holder to change it to a whole of life policy if they so wish. Once you have taken out a convertible term insurance policy, you are entitled to change the length of your plan at any point - regardless of any change to your health or circumstances.
It is important to remember that even though you have the right to change your policy at any time, the premiums that you pay will probably go up. This is because by changing your policy to a whole of life plan, you are guaranteeing a payout on the plan at some point.
Not all brokers that MoneyExpert work with offer convertible term life insurance.
This type of insurance is known as renewable term life insurance. This refers to policies that allow the plan holder to renew their deal when the agreed term runs out. This means that the person being insured does not need to undergo a health review. There is however the possibility that the price of the plan may change over time so it is worth bearing this in mind when taking it out this form of policy.
Not all brokers that MoneyExpert work with offer renewable term life insurance.
This type of insurance has its price linked to the Retail Prices Index measurement of inflation. By taking out an index linked life insurance policy you can rest assured that your policy payout will not be lessened over time by the real price increases of daily living.
Not all brokers that MoneyExpert work with offer index-linked term life insurance.
The name "joint life insurance" applies to insurance policies that cover more than one person. This type of life insurance is typically taken out by those who have close financial ties to a spouse or partner and who wish to take out one policy between them, as opposed to two separate ones. These types of policy will often have lower prices but this is because they only pay out once.
Joint life insurance policies operate on a "first death basis". This means that whichever of the two policy holders lives dies first will be paid out for. The sum of money goes to the second of the two and at that point the policy ends. Once this policy has ended, the second holder will have to take out a new one if they want to remain insured.
It is important to remember that if you want to take out a new policy after your initial one has ended, then your premiums may be much higher as you are likely to be a lot older.
This type of life insurance policy pays out its sum in the form of an income, instead of as one lump payment. This form of policy is normally cheaper than other forms of term life insurance. The reason for this is that the insurer will end up paying out less than they would on other policy types.
Whole of life insurance can also be referred to as life assurance. The reason for this is that when you take out this form of policy, you are guaranteed to receive a payout. Unlike like term insurance, whole of life insurance will cover you from the start of the policy until the end of your life.
Some whole of life policies are linked to investments. It is best to speak to a specialist insurance adviser or financial adviser if you want to explore this option.
Life insurance for over 50s are available to those aged 50-85 will generally have a much lower payout due to the increased age of the policy holders. People normally take out these policies in order to cover funeral costs. The prices of these plans are always fixed and over 50s plans can be taken out for up to £20,000 max cover amount.
It is important to be aware that with a guaranteed over 50s plan, you may pay more in premiums than the policy will pay out through the sum assured.