A Guide to Life Insurance

Everything you need to know about life insurance

Jimmy Dean on Unsplash

Jimmy Dean on Unsplash


Life Insurance provider Cavendish Online share their comprehensive guide on life insurance - with FAQs and answers. Find out more about Cavendish Online here.

What is Life Insurance and what does it cover?

Life insurance is a type of insurance policy that pays out money to your loved ones after you pass away. Some people find arranging life insurance a daunting prospect, but it’s arguably one of the most important forms of cover, as it protects the people you hold dearest.

If you don’t currently have any insurance in place, there is no better time than now to arrange a policy to protect your family and give you complete peace of mind.

Why should I buy it?

Of all insurance products, life insurance is perhaps the one that’s most often misunderstood: regarding who needs it, who benefits, and typically how much it costs.

If your children, partner or other family members depend on your income to cover their living expenses (including the home that they live in) you should definitely consider life insurance to help provide for them in the event of your death.

If possible, do not rely entirely on the state to take care of your family – the help they would receive from the government would likely to be much lower than you’d expect.

Top frequently asked questions - with answers:

What are the main life insurance policy types?

The two main types of life insurance policies are 'term' life insurance and 'whole-of-life' insurance.

‘Term’ life insurance policies run for a fixed period of time (known as the ‘term’ of your policy) eg. 10, 15 or 25 years - but only pay out if you were to pass away during the term of the policy. So, there’d be no lump sum payable when you come to the end of the term.

‘Whole-of-life’ insurance policies pay out regardless of when you die, as long as you keep up with your monthly premium payments. This type of cover is usually of interest to those who are determined to leave some form of inheritance to their loved ones, or if you want to help with your funeral costs. Generally, these policies cost a fair bit more than term policies because as long as you keep paying your premiums, the insurer will always have to pay out; whereas you may outlive a term insurance policy.

What are joint policies?

You can apply for a life insurance policy as an individual, or as a joint policy with your partner or spouse. Some people like this option as it’s easier to manage, quicker to set up and typically cheaper than both having separate policies.

‘Single’ and ‘Joint’ Life Insurance policies are similar, but there are a few key differences:

‘Single’ Life Insurance covers just one person and if the policyholder were to die during the term of the policy, their loved ones would receive a payout. If you and your partner were to decide to take out two separate ‘single’ policies, then a payout could then be claimed for each policy if both policyholders die within the term.

‘Joint’ Life Insurance covers two people on a single policy and means there’s only one monthly premium to pay. Some people find this simpler to manage and you’ll only need to complete one application, but you would have to answer questions for both policyholders.

If one of the policyholders were to die during the policy term, their loved ones would receive a payout, however the policy would no longer exist for the remaining policyholder; meaning they would need to apply for a new policy if they wanted to still have cover in place.

When it comes to buying life insurance, the younger you are, the less expensive it generally is, so taking out a policy later in life inherently increases the price of a monthly premium.

Tips for buying Life Insurance

Don’t assume it’s too expensive.

There are plenty of affordable life insurance options out there - so get a quote and you might be surprised how inexpensive it is.

Buy today (don’t delay).

If you have other people who financially depend on your income, it’s really important that you consider taking out a policy as soon as you can. Also, the younger you are when you take out a policy, the less expensive it will generally be.

Don’t assume you won’t get cover due to health conditions.

Different insurance providers have their respective processes and rules for what can be underwritten.

Some may be more lenient than others about particular health conditions. Shopping around is the best way to make sure you’re getting a good deal.

Understand any limitations of your employer’s life cover.

If you have life cover in place through your work, you can’t always assume that the cover you have would be adequate to your needs. Death in service benefit could certainly go towards helping your loved ones in the event of your death, however it may not be enough to cover everything. It’s also worth noting that this cover will likely stop if you were to leave your job, so keep that in mind.

Be open & honest.

When you make an application for life insurance, you’ll be asked a range of questions about your lifestyle and health in general. It’s important to answer the questions honestly, as incorrect answers could invalidate any claim to be made on the policy.

Don’t underinsure.

You shouldn’t go light on coverage, just to save money. To work out how much cover you might need, consider what would need to be paid in the event of your death, such as replacing your income, paying off a mortgage and also future considerations you’d plan for any children you may have.

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Regulatory Disclaimer:

Worry+Peace is a free service taking the hassle out of insurance for buyers. We are not an insurance provider, we do not earn any commission or fee that is contingent on your purchase of any insurance product from any providers we connect you to. To find out how we earn money, click here.