We’ve all got different reasons for buying life cover, though one thing is the same - we want to protect our family/loved ones if anything happens to us. However, some people may only need cover for a short period. This could be due to a specific financial goal, such as paying off a mortgage or ensuring their kids are cared for until they are grown.

But how does it work and what makes it worth buying? We'll look into how short term life insurance works, as well as the options available.

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What is short term life insurance?

Short term life insurance often refers to “term life insurance”. This is a type of cover that protects the policyholder for a set period of time, usually between 5-50 years. It's a popular choice for those who only want a policy for a short period. It is typically more affordable than whole life insurance, which covers the policyholder for the rest of their life.

How does it work?

Like any form of life insurance, the policy pays out a lump sum when you die. But with term cover, the process is a little different. When you take out a policy, you agree on the policy term (for example, 10 years). The policy then pays out providing you die within this time.

If you reach the end of the term, the policy expires and you will no longer be covered. You also won't be able to be entitled to any refunds on the premiums you paid up to this point.

Types of term life insurance

There are three main types of term cover for a wide range of needs:

  • Level term insurance: This is the most common type of term life insurance, where the payout remains the same throughout the policy term. The cost of your monthly premium also stays the same, even as you get older or develop a health condition.
     

  • Decreasing term insurance: With this type of cover, the payout decreases over time, usually in line with a specific debt, such as a mortgage. The term can be matched to the length of the loan, making it popular for those looking to cover a mortgage.The premium for this policy is fixed, but is generally cheaper than level term insurance. 
     

  • Increasing term insurance: This type of cover can be useful for those who want their payout to keep pace with inflation. The cover amount increases each year in line with a set percentage or the rate of inflation. Because of this, the monthly premium will also increase over time.

If you and your partner share financial responsibilities, you may want to consider a joint term life insurance policy. This means that they are both covered under the same policy. If one of you were to pass away during the term, the death benefit would go to the surviving partner.

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.

Why would I need short term life insurance?

Short-term life insurance can provide a valuable safety net during uncertain times. Whether you're facing increased risks or transitioning between jobs, having short-term cover in place can offer peace of mind for both you and your loved ones.

The reality is that death is a difficult topic to consider, but by ensuring that you have life insurance, you are taking proactive steps to protect your family/loved ones in the event of your passing. With short-term coverage, they can access much-needed funds to pay off debts, cover everyday expenses, and maintain financial stability during challenging circumstances.

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Benefits of having short term life insurance

  • Flexible cover: You can tailor your cover to specific needs, such as paying off a mortgage or ensuring your children are financially secure until they reach adulthood.
     

  • Affordable premiums: Term cover is typically more affordable than whole life insurance, making it a cost-effective option for those who only need protection for a specific period.
     

  • Fixed premiums: If you opt for a level term policy, your premiums will remain the same as when you first took out the policy, making it easier to budget for.
     

  • Joint cover available:If you and your partner share financial responsibilities, you can opt for a joint term policy to ensure both of you are covered under the same policy.

     

  • Peace of mind: Having life insurance can provide peace of mind knowing that your loved ones are financially protected if anything happens to you during the term.

What is the shortest term for term life insurance?

The shortest length for a term policy is usually one year, although some insurers may offer policies with even shorter terms. Typically, people take out a policy for anywhere around 5-50 years. As everyone's situations are different, this will reflect in the length of cover needed.

For more information see: What is the best length for term life insurance?

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How much does short term life insurance cost?

The cost of life insurance cover is usually defined by several factors such as:

Age and health are two of the most important factors that insurers consider when determining premium costs. If you are in your 20s or 30s and are in good health, you could expect to pay less than someone in their 50s or 60s with health issues.

Smoker status is another important factor, as smokers generally pay higher premiums due to the increased health risks associated with smoking. You may be able to lower the premiums if you quit smoking and remain smoke-free for a certain time (usually 12 months).

The length of the policy term can also impact the cost. Cover for short periods of time, such as 1-5 years, may have lower premiums compared to longer term policies like 20 or 30 years.

Can I get permanent life insurance?

Perhaps you are looking for permanent cover instead, in which case whole life insurance may be more suitable for you. This provides cover for the rest of your life as long as premiums are paid. Unlike term life insurance, the policy doesn't expire and the payout is guaranteed.

Like level term cover, the premiums and payout value are fixed throughout the policy. You may opt to add indexation to your policy, so that the payout rises with inflation. Though you should be aware that the premiums will also increase with the cover. Because cover is permanent, premiums are usually more expensive than that of term life insurance.

Not sure which policy you need? Check out: Whole and term life insurance: Which is better?

If you're still unsure about which type of cover you need, our expert advisers are available to help. You can quote and apply online or speak to one of our advisers to discuss your options and find the best priced protection. 

When you buy with one of our advisers, we’ll automatically place you on an annual review scheme. We’ll get in touch every year to check that your policy is still adequate, and look into alternatives if it’s not.

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. 


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