Losing a loved one can cause more than just heartache to a dependent family. The loss of a breadwinner can mean a massive loss of income to a family already struggling through the process of grief, and can throw the family into financial crisis. Life insurance is one of the most affordable ways to ensure your family is financially protected if the worst does happen. Our collection of life insurance tips will help you through the process.
There are plenty of confusing options out there when it comes to life insurance, and if you get it wrong, you could end up paying thousands into a policy that’s just not right for you. Here are some top life insurance tips when buying, to help you choose the very best solution for you.
Know what you want covered
There are some different types of life insurance available, so make sure you’re buying the right one. Level term insurance is the most straightforward, as it pays out on death and always pays the same amount, if you die within the agreed term.
Don’t get confused with other insurances
Other insurance is linked to your life, but is not really the same as true life insurance. Mortgage decreasing term insurance, for instance, is designed to pay off your mortgage, but won’t leave your family with any extra. Know what you’re buying.
Know how much you want covered
A good rule of thumb is to cover ten times your annual income until your kids have finished education. This isn’t hard and fast, and depending on the type of cover that you’re buying, you might just want to go with what you find affordable. Think about the debts you need paid off, and make sure it’s enough.
The cheaper really is the better
This isn’t car insurance. It’s just a straightforward policy that will pay out when you die. There’s little to dispute over whether someone is dead or not, so you can just go with the cheapest.
Joint policies can be poor value
Although a little cheaper to buy than two singles, the policy will end when the first person dies. This means that even if your spouse has paid into a policy for many years, they will have to start over again after you die, which could be expensive if they are getting older by then.
Disclose absolutely everything
You might end up paying a bit more if you have a history of heart problems or some other condition, but it’s better to be honest from the start when it comes to life insurance. The alternative is to pay into a policy for the rest of your life, which refuses to pay out on death because you did not disclose something important.
If you’re a smoker, you’re probably fed up of hearing people tell you to stop. However, when it comes to life insurance, you’ll pay a significantly hiked premium if you indulge in tobacco. To count as a non-smoker, you have to be completely nicotine free for a year, including patches, gums and vaporisers, but you’ll get a knock down price on your life insurance as a reward.
The healthier you are, the cheaper your premium
The cost of life insurance can vary wildly depending on how healthy you are, so it’s a good idea to take it out when you’re still young and fit. You could end up paying a lot less if you take out a 30-year policy as a healthy 55-year-old than if you wait until you’re 70 and have already had some health problems.
Choose a fixed price deal with guaranteed premiums
You will often have the choice of guaranteed or reviewable premiums. A reviewable premiums deal may be cheaper to purchase, but will periodically be reviewed by your insurer and could be hiked later on. Guaranteed premiums means you’ll pay the same every month, no matter what, so you’ll know exactly what you’re paying over the life of the policy.
Write it in trust to keep the taxman at bay
Writing a policy in trust is easy, and most good insurance companies will help you to do this when you buy the policy. If you don’t write it in trust, it becomes part of your estate and can be drastically demolished by a huge hit of inheritance tax. Writing it in trust means it pays out directly to your dependents rather than being processed with the rest of your estate, meaning they get the money faster and without inheritance tax taken out.