How Much Does a £500,000 Life Insurance Policy Cost?

Elaine Brookes Steve Case

Author: Steve Case - Insurance Expert

Reviewed & Fact Checked By: Elaine Brookes

Updated: 10th March 2024

500 000 life insurance

The Insurance Hero team has studied insurers from the big, well-known brands to smaller, more boutique insurers, often never featured on TV or comparison engines.

When looking at higher amounts of cover, including £500,000 and above, what was visible from our findings was the value offered by some of the less well-known names.

One insurer, in particular, was suitable for smokers, and another on our shortlist was excellent for residents of higher-risk areas of the UK.

The premiums for higher amounts can still be surprisingly cheap for people with younger families. Also, consider that despite the rising life expectancy we observe now in the UK, you can never predict exactly when you will pass away, and it’s better to have everything settled in advance.

Without proper life insurance protection, would those close to you be able to:

  • Pay off the mortgage
  • Clear any outstanding debts in your name
  • Fund their current lifestyle
  • Buy a new home
  • Plan for a funeral
  • Deal with inheritance tax

If you weren’t around to make a financial contribution?

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Is 500 000 life insurance enough
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life insurance average cost UK

Life insurance is an essential financial commitment that everyone should consider. It’s a way to protect your loved ones if you die financially.

And while no one likes to think about their death, it’s important to be prepared for anything that might happen.

Life insurance gives you peace of mind, knowing that your loved ones will be taken care of financially if something happens to you.

So please don’t wait until it’s too late. Consider life insurance today. It could be the best decision you ever make.

It’s challenging to put an average cost on any amount of a cash-sum life insurance policy.

Especially higher-value investment policies, in which a £500,000 life insurance policy would be considered an investment. The reason is that it’s unlikely that you’d pay that amount with your monthly premiums over the term of the policy.

To ensure your family gets the funds you take the insurance policy out for, the company providing the assured lump sum under contract would need to invest part of your premiums to ensure they raise enough capital to pay out your policy.

To account for that element, you need to factor in the type of insurance policy. The most used types of policies are term life insurance and whole of life insurance.

Term insurance can be short-term or stretched over a longer term, such as 25 years or longer.

A whole of life means that your policy will remain active until you pass away. At this stage, the lump sum you’re assured for in the plan will be paid to your beneficiaries.

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500 thousand life insurance

How Does Life Insurance Work?

A life insurance policy is a contract between the person whose life is insured and an insurance provider. Anyone can take out a policy on anyone’s life where there’s evidence of a financial relationship.

That could be taking out a life insurance policy on your own life or a joint policy for you and your partner so that in the event of one person’s death, the life insurance policy will pay out a cash sum to the living survivor. Or the proceeds of the policy paid to relatives and dependents.

How it’s paid depends on your instructions and should be discussed with your legal advisor, as writing the policy into Trust is advisable.

average monthly cost for 500 000 life insurance

By writing into Trust, the proceeds are paid directly to the beneficiaries. If that’s not done, the proceeds are accounted for as part of the deceased’s legal estate, which means the sum paid out will be subject to Inheritance Tax.

Therefore, it can be quite a substantial sum, especially when the sum insured is as high as £500,000 life cover.

When arranging a high amount of life cover, it is advisable to seek advice to ensure your policy is set up in the most tax-efficient way possible to benefit the beneficiaries named on your policy.

See Life Insurance FAQs for further information on how life insurance works.

Aside from that, it’s not to say that you need 500 thousand life insurance coverage to ensure your family’s financial certainty. Many life insurance firms will ask questions during the quotation stage to ensure you get a sufficient level of coverage and avoid being underinsured or overinsured.

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is 500k life insurance enough?
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500k life insurance

How Much Life Insurance Do I Need?

When considering investing in a life insurance policy, arranging a £500,000 Life Insurance Policy is a surefire way to ensure your loved ones are left with a reasonable sum to take care of any financial worries they may have.

It’s not going to ease their loss. Still, it will allow them to live with financial certainty for a length of time, alleviating the worry of taking time off work, caring for relatives if they can’t afford to hire help and perhaps even ensuring that children in private education can still have their tuition fees paid until their education ends.

However, it’s not always the case that you need a £500,000 Life Insurance Policy. The amount of cover you need could be far lower than that.

When investing in life insurance, you can look at it in two ways. The first is to choose the amount of cash you want your policy to pay. In the case of arranging a £500,000 policy, that’s what you’d be doing.

The premiums will be higher when you consider what you need to be covered; it may not be near what you require.

Occasionally, securing a £500,000 Life Insurance Policy can mean you’d be over-insured. That would see you paying higher premiums than you need because you’d be insured for a lump sum higher than your family would need for financial stability.

The higher the amount your life insurance policy is worth, the higher the premium you’ll pay.

The amount of life insurance coverage you need is mainly based on your cost of living. Your monthly expenses include family holidays, mortgage payments, childcare, etc.

Whatever it costs your family to maintain their lifestyle, that’s what to account for to determine the amount of cover you need.

This approach to arranging your life insurance policy considers the finances your family would need should you die, which would result in a loss of household income.

For that reason, many online life insurance calculators will have a range of questions and different figures you’d need to account for to determine how much life insurance you would need as a minimum to alleviate any financial pressure on your family in the event of your demise.

Average Premium For 500k Life Insurance

Most online services only give you a rough estimate of the estimated costs and will not provide exact figures.

Many only account for males and females who are either smokers or non-smokers. They do not consider salary information, health information, number of dependents, outstanding mortgage balance, or many other factors that make up your total cost of life insurance.

Using a Life Insurance Calculator (UK) Is 500k life insurance enough?

A life insurance cost calculator is the best way to determine how much a life insurance policy would cost you for the amount your family would need.

The vast majority won’t give you figures based on how much coverage you want to be insured for, but instead, they’ll take you through a series of questions designed to tailor a quote to your specific circumstances.

A list of questions you could be asked during the process of using a life insurance calculator includes:

  • Your gender, such as life insurance for women
  • Your age
  • Your marital status
  • Your monthly or annual salary
  • If you have any dependents under the age of 18
    • If you have children, you’ll be asked questions about them, such as their age, gender and if you’ll pay their university fees and/or their living expenses during their time at university.
  • If you have any other assets that would form part of your estate. This is asked because if you have a couple of homes worth £400,000, then that’s a sum you wouldn’t need to include in your cover as your family could sell those assets to raise cash.
  • If you’re still paying towards your mortgage, and if so, how much is remaining
    • Or, if you’re a tenant, you’d need to include the amount of rent in your life insurance policy.
  • Any savings, investments, existing life insurance policies and any other assets you have
  • Other outstanding debts and loans
  • Any additional costs such as private tuition fees, childcare, or the cost of caring for relatives

These questions are asked to determine the level of cover you need for your family’s living expenses. Based on your answers, the life insurance calculator can decide how much life insurance coverage you require, which may be lower or higher than you thought you needed.

What’s The Average Life Insurance Cost UK?

“The average premium of £10.31 a month, based on a 25-year term for a 38-year-old (average age of SunLife term life insurance customer) and accepted on standard rates, rising to £20.14 per month for smokers.”

The above is a quote from an article published on The figures are based on data obtained during a national survey conducted by Critical Research in 2024. Of those polled, the respondents assumed that the average cost of cover for a £100,000 life insurance policy would cost £51 per month in the region.

It’s far lower, and based on the assumed monthly premium of £51 per month, that’s likely to be the region for a £500,000 life insurance policy, which you’ll see in the chart above, isn’t even as much.

The average cost of life insurance per month for one person is roughly £10 for a non-smoker, which doubles to £20 per month for a non-smoker for a £100,000 policy, which is enough for the average family household to clear debts and any outstanding amounts on an existing mortgage.

This does not consider other health factors, family history, or salary. Therefore, it’s a guideline only. Our average life insurance cost per month page goes into much more detail on this subject.

What if my circumstances change? How does this affect my life cover?

Life insurers evaluate risk based on your exact circumstances.  If, for example, you decide to separate or get divorced, this may affect your cover and premiums. 

It could be wise to consider life insurance for mums or life insurance for dads. However, remember that it is possible to secure 500 000 in life insurance with no medical exam.

Related Reading:

Why Do Quotes from Insurance Comparison Sites and Advisors Differ?

Does Your Occupation Affect Life Insurance?

Research data used for this page: