Buying a life insurance policy can seem daunting at first. Nobody wants to think about a future in which we're no longer around, nevertheless your family deserves peace of mind. 

Life insurance is designed to provide your loved ones with financial support for the future ahead. But before you decide to purchase a life insurance policy, consider these five key questions...

1. Which type of cover should I buy?

Life insurance is designed to pay out a cash lump sum to your family in the event of your death. The amount they receive depends on the type of policy you choose, as does the amount of cover you buy.

There are two main types of life insurance cover - whole life insurance and term life insurance. These policies share similarities as well as differences - mainly in terms of cost and length. It's important to understand how these cover types work, so you can figure out which works best for you.

Whole life insurance...

  • Has no expiry date - the policy lasts for the rest of your life (so long as you keep paying your premiums)

  • Pays out a lump sum to your family, no matter when you die

  • Typically has higher premiums than term life insurance

There are two types of whole life cover:

  • Standard cover - Your premiums and pay out value are fixed throughout your cover as agreed with your insurance provider. Buying this cover when you are younger can lock in a cheaper premium rate, saving you money in the long haul.

  • Maximum cover - Your cover is linked to an investment fund, which your insurer pays into each month using the money from your premiums. If the investment is successful, you may receive a bonus, which is paid into your policy. However, if it fails, your premiums may be raised to cover the loss.

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Term life insurance...

  • Protects you for a set period of time (i.e 20 years)

  • The policy only pays out if you die within this time

  • Premiums for term life insurance are usually much cheaper than whole life

Term life insurance has 3 levels of cover:

  • Level term - The cost of your premiums is fixed throughout the policy term,. The death benefit of the policy also stays the same regardless of when you die during the term.

  • Increasing term - The pay out value of your policy increases over time to try and help to protect the eventual pay-out amount from inflation. The downside to this is that your premiums will also increase.

  • Decreasing term - Typically taken out to cover large payments, such as repayment type mortgages. The policy pay-out decreases over the term of the policy, usually by a set percentage agreed at the policy outset. 

To sum up, if you're looking for a long-term solution for life cover, then a whole life policy may well be your best option. However, if you want cheaper premiums, then term life insurance may be a better choice for cover.

You can also get a joint life insurance policy - this covers two people under a single policy. Many couples choose joint life cover, as it can be cheaper than buying two separate policies. This type of cover typically pays out after the first death of one of the policyholders, and the  policy then ends - the surviving policyholder would need to apply for a new policy at that point if they still needed cover. Learn more about how joint life insurance works.

Products & Services from the leading financial brands

  • Zurich
  • Legal And General
  • Aviva
  • AIG
  • Beagle Street
  • LVE
  • Royal London
  • Vitality Life
  • Virgin Money
  • Budget Insurance
  • Scottish Widows

2. How much life insurance cover do I need?

Before you take out a life insurance policy, you need to understand how much cover is needed. You can do this by assessing your current financial situation and monthly expenditure, which will be affected if you die. That way, you know roughly how much money your family will likely need each month in your absence.

Thankfully, the pay-out from your life insurance policy can help your loved ones with future outgoings, such as:

3. What happens if I cancel my life insurance policy?

If you decide you no longer need life insurance or can no longer afford premiums, then it may be possible to cancel your policy. In most cases, this option is only available for whole of life policies. The surrender value of your policy will be significantly lower than the original payout value of your policy.

If you're struggling to fulfill your monthly payment for cover, you may be able to withdraw money from your policy. In this case, your death benefit may be reduced if you withdraw large amounts. To understand the terms and conditions of your policy, it's best to check your policy documents or speak to your insurer directly.

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4. How much will a life insurance policy cost me?

When buying life cover, there are several factors that can affect the cost of your monthly premiums, such as:

Two of the biggest factors for buying life insurance are age and health. The older you become, the higher you can expect the pay when applying for a policy. The same also goes for if you have any pre-existing conditions. With this in mind, it's often cheaper to buy cover when you are younger. 

Smoking can also have a big impact on how much you pay each month for cover. Not only is it bad for your health, but it can lower your life expectancy, therefore increasing your premiums for life insurance. Depending on the provider, your premiums may be lowered (providing you've stayed smoke-free for at least 12 months, typically subject to a cotinine test).

Apply for a quote in minutes

At Cavendish Online, we are committed to providing the best value for life insurance cover. You can apply for a quote in just minutes by using our online form. Or if you seek further guidance, speak to one of our trained life insurance advisors. Give your family the peace of mind they deserve by applying for a policy today!

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