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We often associate life insurance with being a long-term commitment. There are however situations where a short term policy is the right product to get. So, how does it work and who needs it?
Short term life insurance generally refers to any life insurance policy that offers coverage for one year or less to residents in the UK. Policies can offer coverage for as little as one day and ensure that loved ones are paid if the unexpected happens within a certain period.
It should not be confused with ‘fixed-term’ life insurance, which is provided by companies for a set number of years (usually one to five).
This type of insurance will not replace an existing long-term life insurance policy and won’t act as a cheaper alternative. One appealing factor, however, is that it can usually be obtained quickly, which is perfect for those in need of coverage at short notice.
There are a variety of specific reasons when getting short term life insurance makes sense, which we’ll get to later on in this article.
The cost of short term life insurance can vary depending on a number of factors. As short term cover is generally arranged for periods when an individual’s life is at heightened risk, the cost of premiums can be significantly higher. This is because the likelihood of a claim being made is higher, which increases the risk for the insurance company.
Premiums for short term life insurance are calculated based on a number of factors, including age, term length, health, sum assured, smoking status, and lifestyle. These are the same factors that are taken into account when determining the cost of standard life insurance. However, due to the short term nature of this coverage, the risk to the insurer is less certain, which is reflected in the cost.
In addition to the higher cost, it’s also important to note that short term life insurance typically requires a one-off premium payment, rather than monthly payments. This can be a significant financial burden for some individuals, so it’s essential to carefully consider the cost of the coverage before making a decision.
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The first clear difference is the coverage period. Most long-term life insurance policies will offer coverage for a period of 1 to 40 years, whilst short term life insurance will only cover periods of less than one year.
Long-term policies can also take longer to obtain, as there is an investigation period where a medical exam may need to be conducted to correctly assess health liability.
In contrast, a short term life insurance policy can be obtained quicker, usually in a matter of days or weeks, since there’s a known risk that justifies getting the policy in the first place. The underwriting process is also usually less rigorous, which adds to the efficiency of the service.
There are a variety of reasons why getting a short term life insurance policy makes sense. Perhaps the most common of these reasons is when there is a gap in a long-term life insurance policy.
This can be during the underwriting period of a new policy, or when changing jobs and coverage is no longer provided by the previous employer.
In these situations, the existing long-term insurance provider will usually offer a short term policy to cover this gap. It can be beneficial to accept this offer to save time but could be more costly if there’s a better deal on the market.
Here are some other typical examples of when short term life insurance is beneficial:
Generally speaking, anyone up to the age of 70 can get short term life insurance, however, various factors could influence a provider’s decision.
Most of these are usually linked to health, such as current state of health and lifestyle, family health history, and dangerous habits (such as smoking).
The positive side is that these checks tend to be a lot less rigorous when compared to a long-term insurance policy, which allows for quicker approval.
The cost of short term life insurance policies will vary depending on a range of factors. This includes the nature of the reason behind wanting the policy, age, health condition and lifestyle.
Since short term policies are usually requested for periods when the risk to life is increased, the cost tends to be a lot higher than a long-term policy. This is why a short term policy should be used to supplement long-term insurance and provide some peace of mind in situations where normal life insurance doesn’t do the job.
Note that using this type of policy as a main life insurance policy is not advisable, not to mention costly.
Like all insurance policies, there are certain things to look out for when buying short term life insurance coverage.
Since insurance premiums for this type of policy are usually high, it’s important to get a range of quotes to compare and find the best deal. Note that a provider with experience in offering short term life insurance is always a safer bet.
Policyholders should also ensure that coverage takes into account all risk factors they want to be included and should check if they’re happy with the factors that are left out.
One of the main advantages of short term life insurance is the peace of mind that it provides. Knowing that coverage is in place during a specific period of time, such as when participating in hazardous activities or starting a new job, can provide a sense of security. Additionally, short term life insurance can fill gaps in coverage that may occur when changing jobs or applying for long-term insurance. This type of coverage can be flexible, with terms that can range from one day to one year.
However, there are also downsides to consider. One disadvantage is that premiums can be high due to the increased risk involved in short term coverage. Often, providers require payment of these premiums upfront in one lump sum, which can be a significant financial burden. Additionally, there may be a requirement for extensive medical and personal health information. Lastly, it is important to note that fixed-term insurance is purely for coverage and there is no return if the policy expires without a claim, which means that you will lose all the money you invested on the policy.
Although not as popular a product as long-term life insurance, a short term policy is a beneficial tool that can provide peace of mind and an extra layer of safety in particular situations. If the unexpected were to happen it’s always reassuring to know that family and loved ones are protected.
When looking for short term life insurance, it’s crucial to take the time to compare quotes from different insurers. The cost of premiums and the terms of coverage can vary greatly between different providers, so it’s essential to shop around to find the best policy at the best price. This can help you save money in the long run and ensure that you have the coverage you need.
One way to compare quotes is by visiting different insurance websites and requesting quotes from each provider. However, this can be time-consuming and may not give you a comprehensive view of all the options available. That’s why LifeCoverQuotes is a useful resource that can connect you with brokers offering a range of quotes. We only connect with brokers offering long-term policies, but depending on your circumstances, it may be that this is a better option than arranging short-term coverage.
When you contact LifeCoverQuotes, we’ll connect you with brokers that can provide quotes for policies that meet those needs. This can save you time and effort in finding the right policy and ensure that you have the coverage you need.