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The six best UK life insurance providers of 2024


Top life insurance providers in the UK

AIG Life

AIG is one of the biggest providers in Britain and sells a large range of products. However, it may not be a name you recognise as it does not sell directly to consumers, but via financial advisers.

Despite its size, it does not currently have a ribbon from Fairer Finance, meaning it is not outperforming at least 60pc of the market.

Although it received a high score for paying out claims (86pc) and handling complaints (85pc), it was hampered by a low score of 56pc for transparency. This made for an overall score of 75pc – just short of the level needed to gain a bronze ribbon.

Aviva

Readers with a slightly longer memory might remember Aviva as Norwich Union. It rebranded in 2002, but remains headquartered in Norfolk and has grown to become one of the largest providers of cover in the UK.

While traditionally its products were not listed on price comparison websites, in 2021 it changed this policy meaning you can now compare premiums from Aviva alongside its competitors at one glance.

It has a Fairer Finance gold ribbon with an overall score of 82pc. Despite a slightly below par transparency score of 67pc, it pays out 91pc of claims and netted a score of 90pc for handling complaints.

HSBC

As one of the largest consumer banks in the UK, HSBC is one of the most recognisable names in financial services. Many readers may hold a current account with the provider, but it offers many different types of life insurance, too.

However, its score on the Fairer Finance rankings leaves much to be desired, failing to earn itself a ribbon with an overall mark of 72pc.

It pays out on 89pc of claims and scored 83pc for complaints, but had one of the lowest ratings for transparency out of any of the providers Fairer Finance analysed – just 46pc.

Legal & General

Legal & General is the largest provider of term life insurance in the UK, according to consumer group Which?.

It provides several levels of cover as well as a £10,000 funeral pledge, making immediate payment to this amount as soon as your claim is accepted. 

Fairer Finance rated it at 75pc overall, meaning it does not earn a coveted ribbon. Fairer Finance says it paid out on 71pc of claims (although Which? research said this figure was more than 96pc in 2022) and rated at 71pc for transparency. It had a fairly high score for complaints of 84pc.

Royal London

Another huge insurer, Royal London, offers most types of life insurance, including term cover with the option to add critical illness cover and income protection.

Its overall score of 80pc earns it a Fairer Finance silver ribbon. According to the group’s ratings, it pays out on 80pc of claims, has an 81pc score for dealing with complaints and a 75pc rating for transparency.

Vitality

Vitality, the brand name of Prudential, is well known for its innovative and flexible life insurance. It offers incentives in the form of discounts to those who make healthy lifestyle choices. The level of this offered discount changes depending on how fit and active customers are.

It has a Fairer Finance bronze ribbon, with an overall score of 77pc, but has one of the highest scores for approving claims with 97pc. It has a 78pc ranking for handling complaints and a 58pc score for transparency.

Other high-scoring providers

The Fairer Finance rankings are topped by two firms you may not have heard of. Beagle Street and Smart Insurance both earn a gold ribbon with the highest scores of all the companies analysed: 85pc. Both pay out on 94pc of claims. The other company to get a gold ribbon is the Post Office with a score of 82pc.

Silver ribbons were awarded to Virgin Money and Budget, while Churchill, Santander, Direct Line, Co-operative Insurance and NFU Mutual all won a bronze ribbon.

Fairer Finance updates its ratings every six months. They are available to view here.

Factors affecting life insurance costs

As with premiums across the industry, life insurers will use a number of personal factors to determine premiums, including:

  • Age
  • Pre-existing health conditions
  • Coverage limits (e.g., the size of payout)
  • Additional add-ons (for example, critical illness cover or income protection)
  • Family medical history
  • Weight
  • Smoking
  • Alcohol consumption
  • Hobbies

Ultimately, insurers assess premiums based on the risk that they may need to pay out on a policy. Someone with an unhealthy lifestyle may be more likely to need to make a claim, which is why insurers want to know things such as how much you weigh, how often you drink alcohol or whether you smoke.

The same goes for your health information, as someone with a pre-existing condition could be more likely to make a claim, and most insurers will want to see your medical records.

Likewise, firms will want to know if you have any dangerous hobbies, such as skiing, paragliding or mountaineering, for the same reason.

Benefits of purchasing life insurance

There are several benefits of having a life insurance policy, including:

  • Peace of mind
  • Replacing lost income
  • Paying off debts, such as a mortgage
  • Inheritance tax benefits
  • Cover funeral expenses

The main benefit of life insurance is peace of mind. If a tragedy were to occur and you were to die, then you would be comfortable knowing that your family will be provided for. 

If you have an outstanding mortgage, for example, then a life insurance payout could pay off that debt. Or if you are the main breadwinner in the family then an income benefit policy could replace your income if you died.

There could also be inheritance tax (IHT) advantages to taking out a life insurance policy. A payout could be used to pay IHT obligations – which would otherwise have to be covered by family or by selling property.

A policy can also be “written in trust”, which would take the payout outside of your estate for IHT purposes, potentially leading to a significant tax saving.



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