7 life insurance questions to ask yourself before you buy

Life insurance is not just a financial product; it's a sense of security in the face of life’s uncertainties. However, there's more to buying life insurance than simply choosing a policy and paying a premium. It takes plenty of consideration and self-reflection to choose the right cover for your needs.

So, if you're looking to buy life cover in the near future, here are seven questions you should think about before making a decision.

1. Do I need life insurance?

Not everyone feels the need to buy life insurance, yet it can provide a big helping hand for your family and/or loved ones. If you have dependents, you really can't afford to overlook this important financial product.

Consider your current situation: do you have children, a partner/spouse, or anyone who relies on your income? If the answer is yes, life insurance can help ensure they are financially protected in the event of your untimely passing.

2. Which type of life insurance should I buy?

The policy you choose can impact your cover as well as the cost of your monthly premiums. Life insurance policies come in two main forms:

• Term Life Insurance - which covers you for a set amount of time (usually between 5-50 years). The policy will pay out a lump sum if you pass away during the policy term. However, if you outlive the policy term, it expires. Premiums also tend to be cheaper as a payout isn't guaranteed.
   

• Whole life insurance - which covers you for the rest of your life (as long as you pay your premiums). Unlike term cover, the policy will not expire and pays out regardless of when you die. Premiums are often more expensive, as cover is permanent.

Your decision could depend on two aspects - cost and cover. If you're looking for permanent cover that will last your entire life, then whole life insurance could be the right choice for you.

On the other hand, if you're looking for more affordable premiums and only need cover for a specific period (such as until your children are financially independant or your mortgage is paid off), then term life insurance might be more suitable.

Please note: The insurance products offered by Cavendish Online have no cash-in value at any time. If you stop paying your premiums your cover will stop, your policy will end, and you will receive no benefit. If you have not claimed before the end of your chosen policy term, the policy will end, and no benefit will be paid.

3. How much cover will I need?

Everyone has different needs for cover, so figuring out an ideal amount can go a long way in keeping your loved ones protected. As a general rule of thumb, you should aim for at least 10 times your annual salary, however, this amount can vary based on your circumstances.

For example, if you have a large family, you could require more cover compared to someone with no children. Likewise, if you have debts, such as a mortgage or loans, you may want to factor those into your cover amount.

Consider factors such as:

• Current and future debts
   

• Ongoing living expenses for your family
   

• Childcare costs
   

• Potential income replacement needed for your dependents
   

• Any other financial goals or obligations you have

Remember the more cover you take out, the higher your monthly premiums could be. So, if you're looking to save money, you may want to think about limiting your cover amount.

4. How much will my policy cost?

There's no flat rate for how much a life insurance policy will cost. Instead, premiums can vary based on several factors. These include:

• Age: Those who are younger typically pay lower premiums because they are perceived as lower risk.
   

• Health: Your health status and medical history play a crucial role in determining your premium. Smokers or those with pre-existing conditions may face higher costs.
   

• Policy type: Whole life cover is often more expensive per month than term due to the permanent cover it provides.
   

• Cover amount: The more cover you choose, the higher your premiums will be.
   

• Lifestyle factors: Certain lifestyle choices, such as smoking or engaging in high-risk activities, can lead to increased premiums.

Get an online quote to work out just how much you could pay each month for cover. Compare quotes in minutes with Cavendish Online.

6. Can I cancel my policy?

There may come a point where you feel like you no longer need your life insurance policy, or perhaps you find it too costly. Generally, you can cancel your policy at any time, though you should carefully consider this before doing so.

Most insurers have a 30-day cooling-off period once your policy begins. If you cancel the policy within this time period you'll receive a refund for the premium paid. Beyond this time, you won't receive a refund if you cancel.

If you cancel your policy, you will lose any cover and benefits associated. Additionally, you may face higher premiums due to age or changes to your health if you decide to purchase a new policy in the future.

If you are facing financial difficulties and can no longer afford your premiums, please contact your insurer as soon as possible to stop the plan from lapsing automatically. They may have options available that allow you to keep the cover in place.

7. Should I write my policy in trust?

While the proceeds from your life insurance won't be taxed in the same way as other assets, writing your policy in trust can help ensure that the payout goes directly to your beneficiaries without going through probate.

If your estate exceeds the Inheritance Tax threshold (£325,000), it will be taxed.

Once your policy is written in trust, the benefits can be paid out directly to your chosen beneficiaries upon your death, bypassing the often lengthy and complex probate process. This can provide faster financial support to your loved ones during a difficult time, plus it won't be liable for inheritance tax.

If you're looking to apply for life insurance cover we recommend speaking to one of our helpful advisers. They'll be able to answer any questions you may have as well as help you find the right policy based on your needs and budget. Call our advisory team today on 01392 436193 (Monday - Friday 9am - 5.30pm).