IHT changes driving increased demand for life insurance

Changes to inheritance tax (IHT) rules are driving increased demand for life insurance in the UK and pushing people to rethink their financial planning strategies.

Analysis from MoneySuperMarket showed that online queries for life insurance had risen by 22 per cent year-on-year, while searches for ‘affordable’ life insurance increased by 425 per cent in the three months from December 2025 to February 2026.

This suggested that IHT changes, including bringing unused pensions into the scope of the tax from 2027 and the continued nil-rate band threshold freeze, were encouraging more people to consider life insurance to help protect what they plan to leave to their inheritors.

MoneySuperMarket found that 46 per cent of people who do not have life insurance had never got a quote to see how much it would cost, and MoneySuperMarket life insurance expert, Kara Gammell, urged people who had not explored life insurance to consider it as part of their inheritance planning.

More than a fifth (22 per cent) of people who had never received a quote said it was because they believed it would be too expensive.

However, the comparison site highlighted that life insurance could cost as little as £2.64 a month.

Those considering life insurance in light of the IHT changes were urged to think about whole-of-life policies written in trust, as the payout goes directly to the beneficiaries and sits outside the estate.

"The Chancellor's IHT reforms have changed how many people think about life insurance and the role it can play in their financial planning,” Gammell commented.

"A whole-of-life policy written in trust may be a useful option for people who are worried about leaving their loved ones with a significant inheritance tax bill. Because the payout may sit outside the estate, it doesn't usually form part of the estate for IHT purposes. This means it could be used by beneficiaries to help cover the cost of IHT.

"Our analysis of search data shows that this conversation is reaching well beyond the traditionally wealthy.

“Searches for affordable cover and queries about health conditions are climbing sharply, which suggests people across a much broader income and age range are starting to ask whether life insurance is right for them - and that's a positive shift.

"The good news is that cover is far more accessible and affordable than many people assume.

"Our data shows policies can start from as little as £2.64 a month, and the fact that almost half of over-55s have never checked the price of cover suggests there's a huge opportunity for people to find out what they would pay. In many cases, I think they would be pleasantly surprised."

---