What life insurance policy should I get?

One of the biggest questions people ask when getting life insurance is which type of policy they should opt for. After all, there's a number of policies to choose from, but sometimes only one is right for you and your specific needs, whilst in other circumstances, you may want to consider a package.

Let's take a look at the four main types of life insurance, how they work and why you might need them.

In this guide, you'll learn about:

• The different forms of life insurance and how they work

• The pros and cons of each policy

• The cost of life insurance cover

Types of life insurance

Term life insurance

If you're looking for a policy to cover you for a specific amount of time, then term life insurance is an ideal option. With this option, you choose the term length (usually from 5 to 50 years), and if you pass away within this time, the policy will issue a cash lump sum to your family and/or loved ones. If you survive the policy term, you won't receive a payout, though it's still something to take comfort from.

There are three levels of cover:

• Level term - Also known as 'fixed term'. The cost of premiums and cover amount (death benefit) stay the same throughout the policy, even as you get older.
   

• Decreasing term - Sometimes referred to as 'mortgage life insurance'. The policy is typically linked to a loan or debt, like a mortgage. Overtime, the payout value decreases as you make repayments to the mortgage. The premiums for this policy usually remain the same over time, but they are generally cheaper than level term insurance.

• Increasing term - The death benefit increases overtime in order to protect the value from inflation. This way, your family receives the true value of the policy. The downside is that your premiums will probably increase as well.

Whole life insurance

If term life insurance is yin, then whole life insurance is yang. On the surface, they sound similar, but they operate differently. While term cover protects you for a set time, whole life  cover protects you for the remainder of your life. But to ensure your protection is permanent, you need to keep paying your monthly premium.

Another difference is the cost of premiums. As the whole cover is designed to guarantee a payout when you die, it usually carries a higher price compared to term.

Some insurers offer whole life cover with an investment component. For this, the insurer takes the money from your monthly premiums, placing them in an investment fund. Most of the time it's the insurer who is responsible for which investments but some may allow the policyholder to make such decisions.

*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.

Joint life insurance

For couples needing life insurance, you could opt to take out insurance separately, or in a joint plan together. 

Joint life insurance covers both individuals under one policy. This can be a more cost-effective option than taking out individual policies, as you're essentially covering two people under one premium.

There are two types of joint cover:

• First death -When one person dies, the policy pays out to the surviving partner. This can provide financial support for the remaining partner and any dependants.
   
• Second death -The policy only pays out when both individuals have passed away. This can be beneficial for providing financial support to any dependants or beneficiaries after both are gone.

Guaranteed life insurance

Obtaining cover isn’t always a straightforward process. Those who are older or suffer from pre-existing medical conditions may struggle to get cover or may be required to pay much higher premiums. In which case, guaranteed life insurance can be a suitable option.

This is specifically designed for those who may have difficulty getting traditional life insurance. With guaranteed life insurance, there are no medical exams or health questions to answer. As long as you fall within the age range specified by the insurer, you can get cover.

One of the main types of this cover is over 50s life insurance - available to people aged 50 and over who would otherwise struggle to get standard life insurance cover.

If you're looking for an alternative to life insurance, then you may want to consider critical illness cover. Instead of providing financial protection in the event of death, it protects the insured if they are suddenly diagnosed with a serious illness, injury or disability. Learn more about critical illness cover.

How much will a life insurance policy cost me?

There's no definite answer as to how much your cover will cost. Instead, there are several factors you can use to gauge the potential cost of your monthly premiums, such as:

• Age: Typically, the younger you are when you take out a policy, the cheaper it will be.
   

• Health: Your current health status and medical history can impact the cost of your cover. If you have pre-existing conditions, you may pay higher premiums.
   

• Lifestyle: Factors such as smoking, heavy drinking, or engaging in high-risk activities can also affect the cost of your life insurance policy.
   

• Cover amount: The more cover you want, the higher your premiums may be.
   

• Term length: Shorter terms may be cheaper but provide less cover, while longer terms may be more expensive but offer greater protection.
   

• Occupation: Some professions are considered riskier than others, which can impact the cost of your premiums.