Insure or invest?

If your prime motivation for buying life insurance is to protect the people who are financially dependent on you, the cheapest and simplest way is to buy protection-only or ‘term’ insurance which is the type of life insurance described here.
Term insurance pays out only if you die within a specific period of time (the term) – usually between 5 and 25 years, although it can be longer. If you survive to the end of the term, you get nothing back (in the same way that you get nothing back if you do not claim on your buildings, contents or car insurance).

You can also buy investment-type life insurance. This is basically an investment with life insurance added on for tax reasons. The apparent attraction of this type of insurance is that you get something back whether or not you die – although you should expect this with any sort of investment.
You should also bear in mind that you do not get back the part of your premium which was used to pay for life cover, nor do you get back any commission paid to the person who sold you the insurance (which is invariably higher in cash terms than the commission paid when you buy term insurance).
The main disadvantage of investment-type life insurance is that it is a very expensive way of buying protection for your dependants.

If you want life insurance and you have money to invest, it is usually better to take out term insurance and put your spare cash into other investments.