Comparing life insurance quotes: Understanding policies and costs

So you’ve decided it’s time you applied for life insurance? Great! After all, we all want to make sure our loved ones are looked after when the time comes. Prior to taking out a policy, you'll need to get a life insurance quotation from your chosen insurance provider.

We know that searching for the right life insurance plan can sometimes feel like a drawn-out process. With so many different insurers out there, it can often be overwhelming to choose the best one for you. That’s where we can help...

This guide aims to help you understand what a life insurance quote is, as well as the different policies and costs.

Why apply for life insurance?

If your children, partner or other family members depend on your income to cover their living expenses and the home they live in, you should probably consider life insurance.

You can’t rely on the government to take care of your family. In fact, the money they would get from the state is probably much lower than you’d expect.

Most types of life insurance cover pay out a cash lump sum to your family when you die. This money can cover the cost of future payments, such as your funeral, or help with household bills and mortgage repayments.

Life insurance can also be good value for money, especially when you consider that it could work out at just a few pence a day. Generally speaking, the younger you are when you buy it, the cheaper your monthly premiums will be.

Different online life insurance providers each have their own guidelines for what can be underwritten. If you have health issues, some may be more lenient than others. Shopping around is the best way you can be sure that you’re getting a good deal.

What is a life insurance quote?

In short, a life insurance quotation (or ‘quote’) is an estimation of what you might expect to pay when taking out a policy. Each quote you come across is there as a way to inform you what you can expect to pay, with some companies offering cheaper quotes compared to others.

Types of life insurance cover

There are many types of life insurance, some will suit your needs more than others. The most important part is finding the right policy for you and any loved ones you wish to be covered.

There are several different types of life insurance, such as...

Term life insurance

Term life insurance covers you for a period of time (i.e. 20-30 years) - hence the 'term' part. You'll usually take out this kind of policy to cover financial obligations such as a loan or mortgage. There are 3 different types of term life insurance cover, which are:​

• Level term - Your beneficiaries will receive a lump sum as long as you die within the agreed period. One downside to this, however, is that inflation isn't taken into account - so if you took out a policy 30 years ago, your dependents will technically receive less money in terms of the rise in the cost of living.

• Increasing term - The payout from your insurer will increase over time. This policy works out better if you want to leave your family with financial help, later down the line. For example: If you have young children you may want to leave them money to help pay for a house or living expenses.

• Decreasing term - As the name would suggest, your insurance pay-out decreases over time. This type of policy is aimed at people whose financial responsibilities reduce as time passes.Often chosen to cover debts such as repayment mortgages which can reduce over time.

Whole life insurance

Whole life insurance is sometimes also known as 'life assurance'. Unlike term life insurance, this type of insurance covers you for your whole life, instead of over a period of time.

This type of cover is typically of interest if you wish to leave some form of inheritance to your family. It can also be used to help with your funeral costs.

As with any type of cover, however, you have to make regular payments throughout your lifetime to maintain cover. Due to the guaranteed pay out, premiums for whole life cover are often costly, making them more expensive than other types of cover.

Joint life insurance

If you're married or living together with someone else, joint life insurance may be an option worth considering. With this type of cover, you and your partner are protected under a single policy. If either partner dies, the survivor will receive a payout. This could be used to replace lost income, pay off a mortgage or for anything else your loved ones might need if you pass away.

Critical illness cover

Critical illness cover will pay out if you suffer an illness which meets your chosen providers definition. It's always important to be aware of what critical illnesses you are covered for as insurance providers' cover can differ depending on the insurer you select.

Over 50s life insurance

Over 50s life cover is available to anyone between the ages of 50-80 who have underlying health conditions and may be unable to secure fully medically underwritten cover, or those who simply want to be covered as soon as possible without going through lengthy applications.

Income protection insurance

Income protection insurance will provide you with a regular income (typically up to 70% of your gross annual income) in the event of you being unable to work due to illness or injury, after a specific period of time (the ‘deferred period’).

This policy acts as a support buffer to help stabilise your finances either until you can return to work, the pay-out term ends (some income protection policies have limited payout terms) or you pass away - whichever is earliest.

How to get a life insurance quotation

Getting a quote is as straightforward as it sounds and can be completed in seconds! 

Once you feel you have found the right provider, simply answer their questions regarding your health and lifestyle. Usually it’s a quick and easy process. 

Here at Cavendish Online, we offer 3 separate, but simple routes to take when helping you find an insurance quote:

Determining the cost of your life insurance policy

There are several factors that help insurers generate a quote for the cost of your desired life insurance policy. These can range, depending on the insurer. When you apply for a quote, the insurance company will want to know the following things about you:

• Your age (premiums rise the older you are)
   

• Your health (those with complex medical disclosures may be unable to secure medically underwritten cover)
   

• Your occupation
   

• Whether you participate in any high risk hobbies or activities
   

• If you’re a smoker
   

• The length of coverage you want (the policy term)
   

• The payout amount (the sum assured)

These elements affect the cost of your premiums as well as the overall payout. Should you inform your provider of a pre-existing medical condition, they then may ask you further health questions about:

• How long have you’ve had a condition
   

• If you’re taking any medication
   

• Your family's health history
   

• If you’ve recently been in hospital

With this in mind, it's essential to answer all questions as honestly and accurately as possible. Ultimately, withholding any information could result in a void policy.

If you're looking for cheaper life insurance premiums, there are a few things you can do, including:

• Apply for cover when you are young - this is when life insurance premiums are typically the cheapest. As you get older, the cost of life insurance increases due to the risk of developing medical conditions, or worse, death.
   

• Quit smoking - If you are a smoker, your premiums are likely to be higher than non-smokers. Depending on the insurance provider, you may be able to reduce your premiums if you manage to stay smoke-free for 12 months or longer.

Work out how much cover you need

If you're pondering getting life insurance, one of the most crucial factors is figuring out how much cover you need. To do this, you should consider your current financial situation and how your death would impact your family's finances.

Life insurance helps your loved ones cover the costs of financial commitments, including:

• Living living expenses
   

• Mortgage payments
   

• Funeral costs
   

• Loans
   

• Credit card debt
   

• Child support

Be careful not to over-insure, this can lead to you paying higher premiums for more cover than your family needs. If you are mostly responsible for your family's monthly income, they'll likely need a higher amount of cover.

However, if your partner or spouse earns enough income to cover their monthly costs, you may not need as much cover in place to help them should you pass away

You should weigh up payments made in your name, such as a mortgage, household bills, childcare, loans or credit cards. Should you die, your family will need to carry out payments to maintain their lifestyle and potentially to remain in the family home.

What if I have a death in service benefit through work?

Whilst having a death in service benefit might make a life insurance policy a less urgent purchase, it’s still certainly worth looking into. Death in service benefit will usually be paid out as a tax-free lump sum and is counted as a multiple of your salary.

If you die at any point whilst covered by a death in service benefit by your employer,  your loved ones will receive a payout to use as they see fit. This cover, however, can be limited and may not fully cover your liabilities so it's always a good idea to take out a life insurance policy alongside it.

In reality, it’s unlikely you’ll remain at one company throughout your working life. While your current company might have a great death in service benefit, you could move to a new job, where they have a smaller death in service benefit- or even none at all.

As such, it's worth considering taking out a life insurance policy for added protection. Should you receive a pay-out for a death in service benefit too, it'll be an extra helping hand for your family if you were to pass away. Life insurance can also be used to help families with funeral expenses and estate planning.

Comparing a life insurance quotation

When comparing a life insurance quotation there are 3 things you should consider to help you find the policy that's right for you:

• Which type of life insurance are you looking to buy? 

• What is the amount of life insurance cover you need? 

• Exactly how long do you wish for your policy to last?

Give us a call

Need assistance? You can call us on 01392 43 61 93 to speak with one of our helpful insurance specialists over the phone, who will be ready to help you find the best cover for you and your loved ones.