Taking out life insurance is a big step – and it’s an important decision since the plan could last for a long time.  Though it might be daunting, it could provide financial security and peace of mind in difficult times.

In this guide, we'll walk you through the key steps in buying life insurance cover, including:

  • The basics of life Insurance cover

  • Questions to ask when buying life insurance cover

  • Comparing different policies

  • Tips for choosing the right policy

  • Benefits of taking out life cover

  • Knowing when it’s the right time to take out a policy

  • Factors that affect the Premiums

  • What happens if you can't pay your premiums?

  • Applying for a quote

The basics of life insurance cover

Life insurance is a type of financial protection that provides money for your family or loved ones in the event of your death. It can give  security for financial dependants, such as your spouse, children, and others.

Cover is typically divided into two main types: term life insurance and whole life insurance.

Term life cover provides protection for a set period of time, usually between 5-30+ years. The policy pays out, if you die during the term, or if you are diagnosed with a terminal illness. – be sure to check your policy documents for the exact terms & conditions regarding this as they can vary.

If you outlive the term, there is no payout.

Whole life cover provides cover for your entire life, as long as you continue to pay the premiums. It pays out a cash lump sum when you die, providing potentially much-needed financial support to your loved ones.

When you purchase a life insurance policy, you pay a premium each month. The cost of these monthly premiums could depend on factors such as your age, health, and lifestyle. The insurer may also consider the amount of cover you need and how long you want it to last when deciding the premium.

Most policies have a fixed price for the term, but this changes if you would like the sum assured to increase with inflation. This is called indexation. Learn more about indexation.

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Questions to ask when buying life insurance cover

It’s important to ask the right questions to ensure you get the best cover for your needs. Here are some key questions to ask when buying:

What type of policy is best for me?

Different policies offer levels of cover and benefits, so you should determine which is most suitable for your needs.

What is the cost of premiums?

This may depend on factors, like age, health and occupation. So it’s necessary to get an accurate quote before deciding.

Are there any exclusions or limitations?

Understand what the policy covers, as well as any exclusions or limitations that might apply.

What happens if I can’t pay my premiums?

Be aware of what options are available to you if you cannot make payments on your policy.

Are there any additional benefits or discounts?

Some insurers could offer additional benefits or discounts for certain types of policies. In this case, it’s something worth enquiring about when shopping around.

What is the claims process?

Understanding how to make a claim and what documents are required can help your family or loved ones prepare in advance when making a claim.

How long does it take for a claim to be processed?

The claims process may vary depending on the insurer, as well as the documentation you have to hand and the cause of death. Contact your insurer directly to find out what they need from you.

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Comparing different types of policies

It’s always best to weigh up your options before you commit. Consider factors such as the length of cover, cost of premiums, and benefits provided.

  • Whole life insurance (also known as life assurance): Covers you for the rest of your life, as long as you continue to pay premiums. Whole life policies typically have higher premiums than term life policies as a payout is guaranteed. Furthermore, the premiums and death benefit remain fixed throughout the policy, unless you decide to add on indexation
  • Level-term life insurance: Provides cover for a set period of time, usually between 5-30+ years. The premiums remain the same throughout the term, and the death benefit is paid out if you die during that period. If you outlive the policy, there is no payout and the policy expires.
  • Decreasing term life insurance: Unlike a standard term policy, the death benefit can decrease over time. This type of policy is typically used to cover debts paid off over time, such as a mortgage. The premiums on this policy are fixed, but usually start out cheaper than level term life insurance. If you outlive the policy, there is no payout and the policy expires.
  • Increasing term life insurance: This type of cover provides a death benefit that can increase over the lifetime of the plan. This could be useful if you expect your family or loved one's financial needs to rise in the future. The premiums in this plan will also increase with inflation, so be sure to keep in touch with your provider each year. If you outlive the policy, there is no payout and the policy expires.
  • Over 50s life insurance: Designed for people over 50s and provides cover without a medical exam.  Due to the guaranteed acceptance, the plan includes a moratorium period. A moratorium period means that pre-existing conditions aren’t covered for a set amount of time when the plan starts. This is usually between 6 months - 2 years. The premiums on this type of policy are fixed.
  • Joint life insurance: Covers two people, usually a married couple, under a single policy. Joint policies pay out either after the first death in the couple or when both members have passed. It could also be cheaper than taking out two separate single life policies. It’s also possible to purchase a joint plan as term or whole life insurance. Premiums for these policies are usually fixed, but increase over time if you add on indexation.
  • Critical illness cover: Provides a lump sum if you are diagnosed with a critical illness, such as cancer or heart disease. You could use the payout to cover medical expenses, take time off work or other costs associated with the illness. Premiums are usually fixed unless you add on indexation.

Tips for choosing the right policy

When it comes to choosing the right policy, there are a few tips that might help you make an informed decision:

  • Consider your needs: Think about how much cover you need and how long you want it to last.
  • Compare policies: Weigh up the different policies available, including their premiums, benefits, and length of cover.
  • Read the terms and conditions:Read the policy documents thoroughly, so you're aware of what’s insured and what isn't.
  • Shop around:Get quotes from different insurers to find the best deal.
  • Talk to an expert: If you’re unsure which policy is right for you, speak to an insurance adviser or a financial adviser.

Benefits of taking out life cover

Taking out life cover could provide many benefits, including:

  • Peace of mind - You can relax knowing your family or loved ones are taken care of financially if something happens to you.
  • Financial security - Having a lump sum payment to help cover expenses, such as household bills, mortgage repayments, or funeral costs.
  • Act as an inheritance for your children - If you have children, life insurance may provide an inheritance. This could be especially helpful if you don’t have any other assets to leave them.
  • Protection against inflation - The death benefit of an increasing term policy or a policy with indexation is usually adjusted for inflation, keeping up with the cost of living.

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The risks of taking out cover

Taking out cover can also come with some risks, depending on which plan you have chose. These include:

  • Outliving the plan – this could happen in the case of term insurance
  • Paying more – if you have medical disclosures or a high risk job or hobby, you may have expensive premiums.
  • Paying over what the plan is worth – For plans like Over 50s and whole life cover, you may pay more into the plan than what you are covered for.
  • Your payout may be taxed – whilst the actual payout is tax-free, your family or loved ones may end up having to pay inheritance tax if your estate is over the threshold. To avoid this, you could write your policy in trust. Learn more about writing your policy in trust.
  • Your claim may be denied – ensuring you have put the correct information on your application form is vital to making a claim successful. Learn more about why life insurance claims get denied

When is the right time to take out a policy?

The right time to take out a policy depends on your individual circumstances and goals. However, some general guidelines could help you decide when it’s time might.

  • Consider your current financial situation - If you have enough money saved up to cover any unexpected expenses that would arise if you died, and you feel comfortable using them, then you may not need life insurance. However, if you don’t have enough savings, or you would prefer they not be impacted, then taking out a policy could be a good idea.
  • Think about your family or loved one’s future - If you have dependents, life insurance can help provide them with financial security in the event of your death.
  • Assess long-term goals - Planning on buying a house or starting a business? Then life insurance can help protect such investments in the event of your death. Learn more about business protection.
  • Consider any other factors - For example, if you have a pre-existing medical condition, find out if this will affect the premiums.

Ultimately, it’s important to do your research before deciding when to take out a life insurance policy.

Factors that affect the premiums

The cost of life insurance premiums differs depending on factors, including:

  • Age -Generally, the younger you are, the lower your monthly payments will be.
  • Health & medical history -Premiums may increase if you have any health issues or lifestyle habits that could impact your health.
  • Cover amount - The higher the cover amount, the higher the premiums will be.
  • Type of policy -Different types of policies have different premiums. So it’s important to compare the options before deciding which one is right for you.
  • Occupation -Your occupation can also have an impact on the cost of your premiums. Certain jobs may be considered more dangerous than others.
  • Smoking status - Smokers typically pay higher premiums than non-smokers.

What Happens If You Can't Pay Your Premiums?

If you are unable to pay your premiums, there are usually a few options available.

It’s important to speak to your insurer before making any decisions about your policy. They will be able to provide more information and advice on what options are available.

Applying for a quote

Applying for a life insurance quote is a straightforward process. When applying, you will need to provide some information about yourself, such as your age, occupation, and medical history. You’ll also need to specify the type of policy you are looking for and the amount of cover you require.

At Cavendish Online, we make it easy to compare quotes from different insurers, so you can find the best deals. Simply fill out our easy-to-use form, and we'll provide affordable quotes from leading providers in a matter of minutes!

Speak to the experts...

Give our advisers a call today.

Our team of friendly and professional advisers are on hand to help with any questions you may have regarding Life Insurance.

The advisers can also make recommendations tailored to your current situation and will research the market on your behalf, ensuring you secure the cover you need and supporting you every step of the way. 

01392 43 61 93(Monday to Friday, 9am - 5.30pm)

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