What is life insurance?
Life insurance pays a lump sum, or an income, when the person covered dies. It is used to clear a mortgage, replace lost income, provide for children, or meet an expected inheritance tax bill. Cover can run for a fixed term or for life.
The amount and the term should follow the liability. A mortgage needs cover for as long as the debt runs; children need cover until they are independent; an inheritance tax bill needs cover that lasts as long as you do.
The single most important decision is not the insurer or the premium. It is whether the policy is written in trust. Without a trust the payout falls into the estate, may be taxed at 40%, and is held up by probate at exactly the moment the family needs cash.
Cover should be reviewed on every material change — a move, a birth, a divorce, a business loan, a new job with different death in service benefits. Policies bought fifteen years ago for a mortgage that has since been repaid are common; so are families badly underinsured against a mortgage that has grown.