Life insurance policies have long been considered an important part of financial protection. If you die unexpectedly, your family would receive a lump sum payment, which they can use to cover future costs.

If you're looking to buy cover, you may be feeling unsure as to which life insurance plan is right for you. Here are some things you need to know before you apply.

How does a life insurance plan work?

Life insurance pays out a lump sum when you die, with the death benefit going to your beneficiaries. The value of the death benefit depends on how much cover you've purchased, what type of policy you have, and when it was taken out.

The amount of cover you choose will depend on the amount of financial support your family requires. For example, if you're buying cover for your mortgage, you might opt for a policy with a higher level of cover. 

Once you take out cover, you pay a premium to your insurer each month. You are required to continue paying these premiums to stay covered.

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The main types of life insurance plans

  • Whole life insurance - this type of life insurance plan covers the policyholder for the remainder of their life, paying out a cash lump sum upon their death. Unlike other types of cover, it offers long-term financial security, however, it is also one of the more expensive types of plans.

  • Term life insurance - this type of plan covers the policyholder for a set period of time, for example, 20 years. The policy pays out a cash sum, providing they die within the policy term selected. If they outlive the policy term, the policy expires, and they won't be entitled to any refund for the premiums paid.

  • Over 50s life insurance - this type of plan is designed specifically for individuals aged 50-80. It provides affordable cover for those who may be denied cover due to their age or if they have pre-existing medical conditions. This type of policy pays out a cash lump sum upon the policyholder's death.

  • Critical illness cover - while this type of plan does not always cover you in the event of death, it will pay out if you are diagnosed with a serious illness or injury, providing it is covered by your chosen insurer. This way, you can cover bills whilst you are unable to work.

  • Joint life insurance - a popular choice for couples, a joint policy protects two people under a single policy. It can often work out cheaper than buying separate policies, paying out after one or both policyholders have passed away.

Unsure of your options?

Should I get a term or whole life plan?

As the two most popular choices for cover, you may find yourself torn between a term life or whole life policy. This is ultimately down to two things - how long you require cover for, and how much you want to pay for cover.

If you're looking for cover that will last for the rest of your life time, then a whole life policy will be your preferred choice. This covers you for the remainder of your life, so long as you continue to carry out your monthly payments. Term life policies, on the other hand, are more useful to cover periods where your loved ones might be financially vulnerable by your passing away - i.e. if you have young children, other dependents, or a mortgage to pay off.

When it comes to premiums, whole life incurs a higher cost because the payout is guaranteed. With term life insurance, there is a chance you can survive the policy, so the premiums are cheaper.  If you're still unsure which of these policy types is right for you, check out - Whole and term life insurance: Which is better?

It is important to remember that for both types of policies your cover will stay in place so long as you continue to pay your monthly premiums.  If you survive your term policy, you will not be entitled to any payout or refund of any premiums paid unless you have set up an investment-linked plan. 

Please note that Cavendish Online is not authorised to sell investment-linked life insurance plans. 

How much cover will I need?

If you want to protect your loved ones financially, then you should consider getting a decent amount of life insurance cover. This often depends on your circumstances or budget, however, many factors go into choosing the right amount of cover. 

You'll need to decide how much money you'd like to leave behind, whether you want to leave an inheritance or simply enough to support your family with the cost of living. This includes covering costs such as:

It's important to remember that the more cover you take out, the more expensive your monthly premiums will be. With this in mind, you should avoid over-insuring, as you'll end up paying more in the long-haul.

Apply for life insurance with Cavendish Online

At Cavendish Online, we know how much family means,  so we want to be there every step of the way with you. The best way to find cheap life insurance quotes is by using our free comparison service. Simply enter some details, answer a few medical questions, and we'll provide quotes from leading insurance companies.

Or if you require further advice, you can speak to one of our trained life insurance advisers. They can advise which policy is best for you, and much more.

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