In life, situations can change quickly, which is why it only makes sense to have financial protection in place.

Life Assurance, for example, can provide a payout upon the death of the insured. Beneficial if you wish to protect your family and/or loved ones for the long haul.

However, some policies may have a cash value that can be used before death. But is this possible, and what are the restrictions?


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How does Life Assurance work?

Life Assurance is a type of policy that pays out no matter when death occurs. It's also commonly known as 'Whole of Life Insurance'. How it works is in the name, with assurance meaning guarantee of payment, should you pass away.

Once you take out a policy, you pay a monthly premium to your insurer. You’re required to make these payments throughout the policy to remain covered. These premiums are typically based on your age, health as well as the amount of cover you wish to buy.

Premiums also remain fixed throughout the policy. Even as you get older or develop health problems, your premiums won’t be raised by the insurer.

Upon death, a cash lump sum is paid out to your next of kin or named beneficiary. This sum may help your family/loved ones cover mortgage payments, funeral costs, bills and other debts.

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.


How does it differ from Life Insurance?

While they virtually sound the same, both types of cover work differently.

Life Insurance (also known as ‘Term Life Insurance’) provides coverage for a specific period, typically up to 30 years. It only pays out if you pass away during that time. If you survive the agreed period, the policy ends and you do not receive any payout.

Life Assurance, on the other hand, is designed to protect an entire life. It pays out regardless of when you die (including after retirement). This means that if you live beyond your life expectancy, then the money will still be there for your family and/or loved ones.

What is 'cash-in value'?

The term 'cash-in value' refers to the amount of money you may receive from surrendering your life policy.

This sum is measured by subtracting premiums and other costs from the death benefit. If you choose this option, you’ll receive a lower payout compared to a natural payout.


Can I pay cash in my policy?

Most Life Assurance policies do not allow you to cash in the policy value before death. However, some insurers include a surrender value which is deducted from the policy if you decide to cancel.

The payout amount will depend on how long your life cover has been in place and the type of policy you have taken out.

Note that surrendering your policy may result in a significant cut in the payout. As such, assess whether it's worth ending your cover or keeping it in place.

Please note: If you have purchased Life Assurance via Cavendish Online, then there will be no cash-in value, as we do not offer investment products.


Drawbacks to cashing in your policy

Cashing in a policy can be tempting for many individuals dealing with financial hardship or simply wanting to access funds early.

As mentioned, surrendering a policy will usually result in a lower sum than if the policyholder were to wait until death. Therefore, you need to consider the pros and cons of having cover.

There are also tax implications. Depending on the circumstances, the money received from cashing out a Life Assurance policy may be subject to tax. Leaving you with even less money than you would receive the policy pays out naturally.


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What if I don't cash in my policy?

If you don't decide to cash in your policy before death, then the full sum assured will be paid out upon your passing. This means that the money can be used as intended; whether it is to cover funeral expenses or other costs.

How long does it take to cash in a policy?

The amount of time it takes to cash in a policy will vary depending on the insurer. Generally, the process can take up to 30 days from the date of your request.

In some cases, it may be possible to access the funds quicker if you provide all the necessary paperwork. Most insurers may also require proof of identity and other documents before any money can be released.

If you're unsure about your option, get in touch with one of our experienced advisers. They can help you understand your options to determine the best course of action.


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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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