There may come a point where you no longer require life insurance, or you cannot afford your premiums, in which case, you may be wondering if you can cash in your policy. This comes down to two things - your provider's terms and conditions, and the type of policy you own.
Some whole life insurance policies allow you to borrow against or surrender the policy. However, in doing so, this usually results in a significant financial penalty. When surrendering a whole life policy, you're revoking your cover, therefore if you die at any stage after this, your family won't receive a payout.
Once you surrender the policy, you'll receive part of the original payout amount - this is hit with a penalty. As a result, you'll receive less for cashing in your policy, than if it pays out as normal when you die.
Please note that Cavendish Online is not authorised to sell policies with an investment and/or cash in value.
With term life insurance, if you die before the end of your policy, your beneficiaries will receive a lump sum payment. However, if you outlive the policy term, the policy expires, meaning you will no longer be covered in the event of death. Furthermore, you won't be entitled to any compensation for the premiums paid during the cover term.
Once your policy expires, the only logical alternative for cover is to take out a new policy. At this point, you'd need to consider whether it is worth getting additional cover, as your circumstances may have changed. For example, if you're still paying off your mortgage, you may want to buy cover to ensure it is still protected.
If you're looking for permanent cover, you may be better suited to a whole life insurance policy. This type of cover pays out a cash lump sum regardless of when you die.
For further information, please read: What Happens If You Outlive Your Life Insurance? - this will help to answer any questions you may have about what to do when you reach the end of the policy term.
While the main purpose of life insurance is to provide protection for the future, it can have some uses during the present too. Perhaps you've reached the stage where you feel you no longer need life insurance, or you can no longer afford your monthly premium? You're usually left with two options, cancel your policy, or cash in the policy.
If you decide to cancel your policy, you are only entitled to a refund during the first 30 days of cover - known as the cooling off period. However, once this period has passed, you'll no longer be entitled to a refund.
Some whole life insurance policies allow you to cash in your policy (also known as surrendering the policy). In this case, a surrender fee would be charged against the cash value of your policy. This results in you receiving significantly less than what the policy would originally pay out.
Please note that whilst there are life insurance policies available with an investment element and/or cash surrender value, Cavendish Online is not authorised to sell this type of policy.
We all have different circumstances which can change at any point, including whether you still need life insurance or not. It may even be the case that you cannot afford premiums or see the need to continue paying for cover. This may leave you wondering whether it's time to cancel your life insurance cover, but will you get your money back if you do so?
As you might expect, the answer is usually no. When you take out a life insurance policy, you are required to pay premiums in order to stay covered. By choosing to cancel your policy, you are no longer paying premiums, therefore you are no longer entitled to cover. In this case, you won't be able to claim a refund on the premiums you've paid up to this point.
However, there is one exception for recovering a refund when cancelling your policy. Many insurance companies will have a 30 day cooling off period once you take out cover. In this time, you can choose to cancel the policy if you change your mind, in which case you'll receive a refund for the monthly premium you paid. But remember, once you've passed the first 30 days of cover, you'll no longer be entitled to a refund.
If you have a whole life policy, you may be able to cash in your policy if you no longer require cover. This results in surrendering the policy, in which a hefty penalty is added to the value of your policy. This means you'll receive a much smaller amount than if the policy paid out naturally.
Please note that Cavendish Online is not authorised to sell policies that have an investment element and/or a cash in option.
Whilst life insurance plays a huge part in protecting our families' finances, when's the right time to take out a policy? This can ultimately depend on your circumstances.
For example, if you're single with no children, and no mortgage, you might be less likely to need life cover compared to someone who's married and has a family and a mortgage to protect.
If you didn't already know, your age is a massive factor in determining the cost of your monthly premiums.
Ideally, the best time to take out cover is when you are younger, which is when premiums will be at their cheapest. This is mainly because younger people are generally considered to be in good to average health, meaning they're less likely to make a claim. There are other factors that can cause the premiums to be more expensive, even if you are young, these include things like smoking status, medical history, family history or hazardous occupations/hobbies.
Regardless, life insurance can be a valuable form of protection no matter how old you are. If you need some help deciding what might be best in your current chapter of life please read: When is the right time to buy life insurance?
It's never nice to think about it, but death can happen to us at any stage, meaning that it’s important to make sure all bases are covered when buying life insurance.
The types of death covered under your life insurance agreement can vary depending on the terms and conditions of your provider. Most insurers will cover types of death, including:
Natural causes - this covers natural causes, such as heart attacks, certain types of cancer, strokes, organ failure, and other deaths due to natural causes.
Accidental death - this covers accidental deaths, such as car accidents, drowning, fires, accidental drug overdose and other accidents where the victim is not responsible.
Murder - Your policy can pay out if you are murdered, however this is so long as your beneficiary is not responsible/linked to the murder.
Suicide - Most life insurance providers will cover you in the event of death by suicide, though there are some strings attached. Your beneficiaries will only receive a payout if you die outside of the contestable period - this usually lasts for 12 months after the policy is taken out.
It's actually possible to have too much insurance. In fact, there are many reasons why someone might want to carry more than necessary. For example, some people believe that having more money saved up for a rainy day makes them feel safer.
Some people say that they like knowing that they have extra protection just in case something goes wrong. And still others simply want to make sure that their families always have access to cash no matter what happens.
While having too little life insurance can be dangerous, having too much can also be unwise. If you have more life insurance than needed, you run the risk of paying unnecessary premiums. This could end up costing you much more over time.
This is why it's important to calculate how much cover your family will need. This may include any long-term payments you are required to make, such as a mortgage or financial aid until children are financially independent.
Speaking to an adviser is best if you’re not sure how much cover you need as they can recommend a package or plan based on your specific circumstances.
There are two types of life insurance - term life insurance and whole life insurance.
Term life insurance covers you for a set period of time, for example 30 years. This makes it perfect for covering your mortgage or covering a time where your family might be financially vulnerable without you.
Whole life insurance covers you from the moment the policy starts, right up to the moment you pass away. That means that this type of cover comes with a guaranteed payout, this could be ideal if you’re looking to leave your family money when you pass away.