Short term life insurance

Short term life insurance can provide extra protection when there's a known risk to the policyholder. Find out how it works and who might need it.

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While life insurance is generally classed as a long term arrangement, some circumstances may require a short term policy.

We take a look at what short term life insurance is, how it works and when it may be beneficial.

What is short term life insurance?

Short term life insurance refers to a policy taken out to provide cover for one year or less. It is usually added on to an existing long term cover policy during a period of increased risk, to provide extra protection. As short term cover is expensive and provides a small payout, it is rarely taken out on its own.

If you die with this type of cover in place on top of your regular policy, your loved ones will receive two payouts.

What’s the difference between short term and long term cover?

The main difference is the length of time the policy is valid for. Long term life insurance covers you for a period of several years – usually upwards of five (a fixed term policy can cover you for between one and five years, while life assurance cover usually has no end date). Short term life cover is usually a policy lasting up to one year.

While the both methods provide a payout upon the policyholder’s death, short term cover is generally more expensive as it’s often taken out due to a known risk to the policyholder.

Why would I want short term life insurance?

Short term life insurance is usually taken out as a placeholder for a long term policy, or when there’s an increase health risk to the policyholder.

Some examples of times in which you might take out a short term life insurance policy include:

  • Travelling to dangerous territories (for either work or leisure purposes). For example, you can cover yourself against terrorist attacks when travelling to a high-risk country.
  • Taking part in a dangerous event, like climbing a mountain for charity or doing a cross channel swim.
  • Taking out a short term loan or business transaction. The extra cover can ensure the balance would be covered if you were to die before it is paid off.
  • Short term cover can offer protection for you and your family while you’re waiting for your long term policy to be approved. Note that many insurers offer free accident only benefits for 90 days while this process takes place.
  • If you’ve left a job with a death in service benefit. This can ensure that, if the worst happens before you receive this employee benefit through your next role, your family still gets a payout.

Who usually needs short term life insurance?

This kind of cover is best suited to people who need temporary cover or to top up existing cover for a short period of time.

You can find the scenarios where you are likely to need short term life insurance cover above, but they usually include travelling to a dangerous country, engaging in a dangerous activity, covering a short term debt or needing cover while you are between long term policies.

Am I eligible for short term life insurance?

In principle, anyone up to the age of 70 is eligible for short term life insurance cover.

However, like with long term cover, your application will depend on health and lifestyle factors. Insurers usually require less medical information and investigation for short term cover, to allow for quicker acceptance, but this is reflected in the cost of the cover.

Are the premiums more expensive for short term life cover?

Yes. While costs depend on the provider, the level of cover you require and your personal details, short term life insurance cover is usually pricier than long term cover.

That said, short term cover can sometimes provide protection where long term cover can’t, and so the extra expense is often worth it.

What is the minimum and maximum term for short term life insurance?

This can change by insurer, but you can get short term life insurance cover for as little as one day, with the maximum cover term usually being one year.

How can I find the best short term life insurance providers?

The definition of best is subjective and depends on your circumstances and requirements.

The best way to find the best deal for you is to compare policies from different providers. You can also use an independent advisor to help you navigate the different options.

Pros and cons for short term life insurance

Pros

  • Flexible cover that can be taken out for a short period of time
  • Provides extra protection to the policyholder for a known risk
  • Loved ones get a double payout upon the policyholder’s death

Cons

  • More expensive than long term cover
  • Usually requires the premiums to be paid upfront as one lump sum

Bottom line

While short term cover is expensive and doesn’t usually provide good value when taken out on its own, it can be helpful in certain circumstances.

If you’re travelling somewhere dangerous, planning to engage in a dangerous activity or going through a period of time where you have extra debt, short term life cover can provide peace of mind by giving your loved ones an extra layer of protection if something was to happen to you.

Short term life insurance can also be useful if you’e waiting for long term cover to kick in – either from a traditional life insurance company or through a death in service benefit.

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