If you're in need of life insurance but have no idea how to go about buying a policy, these tips should help you find the right deal.
If you've reached the stage in your life where life insurance is a must-have financial product, the next step is finding a policy that will suit you.
However, searching for life insurance isn't always a simple task. The array of different options available to you may feel daunting, and there are many things you must consider to make sure you choose a policy that properly reflects your needs.
In this article, I'm going to offer eight tips that should help anyone on the hunt for a new life insurance policy.
1. Don't delay
If you know you need life insurance, don't delay buying a policy. If you are young and healthy, it will be cheaper for you to buy life cover now than it might be in a few years' time.
This is because all insurers base the price of customers' premiums on risk assessment – and in the case of life insurance, the key risk considered is how likely it is you will die.
2. Shop around
It's a good idea to shop around when buying any form of insurance, and life cover is no exception.
Shopping around is important because not all insurers assess risk in the same way. For example, insurance companies tend to increase prices for customers who don't have a healthy body mass index, but not all will add the same 'load' to an overweight customer's premium. (You can read more about this here.
Many mortgage lenders offer life insurance to their customers, but buying from them may mean you don't get the best deal. This is because lenders tend to be tied to just one insurance provider and are unable to scour the market.
If you're looking to compare life insurance deals, BeatThatQuote.com's life insurance service could put you in touch with an independent, whole-of-market broker who will help you find the cover that's right for you.
3. Pick the right kind of policy
Whether you buy level term assurance, decreasing term assurance or whole of life insurance will depend upon your individual needs and budget.
Level term assurance (LTA) is generally the most popular form of life insurance. A policy is taken out for an agreed period of time (the 'term'), which might be the length of time an individual expects their family to be financially dependent on them.
The payout a policy-holder's family would be entitled to if they died at any point during the term remains level; they'd get the same if you died after a year as they would if you passed away after 20.
On the other hand, decreasing term assurance (DTA) tends to be cheaper because it is designed to pay out a lump sum that decreases over time. You might opt for DTA because your life insurance policy is intended solely to cover your share of a repayment mortgage, and your family will therefore need a smaller payout from your insurer if you die later.
4. Make sure you buy enough cover
When deciding how much life cover you need, make sure you carefully consider the financial impact your death would have on your family.
It's likely that the bulk of any payment your family received upon your death would be used to pay off your mortgage.
However, it's important to make sure any other outstanding debts, such ascredit card and loan balances, are covered too; if they aren't, your loved-ones will be left to pay them off out of your estate.
It's also important to consider how much your family would need to live on if your income was suddenly lost. Make sure your life insurance payout would cover any household expenses that couldn't be met in your absence.
5. Set up your policy in trust
A trust is a free and simple way to ensure that an asset you've put aside will benefit the people it is intended for.
If you don't put your life insurance policy in trust, the sum it pays out will automatically become part of your estate when you die and will be subject to inheritance tax (IHT).
Currently, this means that for every £100,000 paid out by your insurer your family could face a £40,000 IHT bill!
Luckily, putting your policy in trust is simple; all it requires is that you fill in the correct forms.
6. Consider single life insurance policies instead of joint cover
In previous years, it was often significantly cheaper for a couple to buy a joint life insurance policy than for each partner to insure their life separately.
However, it may now only cost slightly more to buy two life insurance policies instead of joint cover.
Doing so could provide your family with double the amount of protection, so it's worth investigating both options before committing to either joint or individual cover.
7. Be honest and accurate when you fill in your application forms
When you apply for any kind of insurance, it is crucial to ensure you honestly and accurately supply your provider with all the information they require.
If you fail to disclose essential facts – for example, by forgetting (or omitting) to mention a pre-existing medical condition to your life insurer – the company could refuse to pay out in the event of your death.
8. Don't forget to review your level of cover regularly
Finally, it's important to remember that life insurance isn't a financial product you can buy and then neglect. In order to ensure your policy offers you and your family the protection you really need, it's vital to regularly review your level of cover.
Life changing events such as having another baby or moving house can seriously affect how much life insurance you need – so make sure you re-think your requirements when something significant happens to you.
You can find out more about how people's life insurance needs change over time by reading this article.
**Articles featured on BeatThatQuote.com are for information purposes only and reflect the views of individual writers. Articles are not, and should not be considered as, financial advice. BeatThatQuote.com strongly encourages our readers not to rely solely on information contained within our website, but to conduct their own research and seek independent advice about the financial products they purchase.**
If you've reached the stage in your life where life insurance is a must-have financial product, the next step is finding a policy that will suit you.
However, searching for life insurance isn't always a simple task. The array of different options available to you may feel daunting, and there are many things you must consider to make sure you choose a policy that properly reflects your needs.
In this article, I'm going to offer eight tips that should help anyone on the hunt for a new life insurance policy.
1. Don't delay
If you know you need life insurance, don't delay buying a policy. If you are young and healthy, it will be cheaper for you to buy life cover now than it might be in a few years' time.
This is because all insurers base the price of customers' premiums on risk assessment – and in the case of life insurance, the key risk considered is how likely it is you will die.
2. Shop around
It's a good idea to shop around when buying any form of insurance, and life cover is no exception.
Shopping around is important because not all insurers assess risk in the same way. For example, insurance companies tend to increase prices for customers who don't have a healthy body mass index, but not all will add the same 'load' to an overweight customer's premium. (You can read more about this here.
Many mortgage lenders offer life insurance to their customers, but buying from them may mean you don't get the best deal. This is because lenders tend to be tied to just one insurance provider and are unable to scour the market.
If you're looking to compare life insurance deals, BeatThatQuote.com's life insurance service could put you in touch with an independent, whole-of-market broker who will help you find the cover that's right for you.
3. Pick the right kind of policy
Whether you buy level term assurance, decreasing term assurance or whole of life insurance will depend upon your individual needs and budget.
Level term assurance (LTA) is generally the most popular form of life insurance. A policy is taken out for an agreed period of time (the 'term'), which might be the length of time an individual expects their family to be financially dependent on them.
The payout a policy-holder's family would be entitled to if they died at any point during the term remains level; they'd get the same if you died after a year as they would if you passed away after 20.
On the other hand, decreasing term assurance (DTA) tends to be cheaper because it is designed to pay out a lump sum that decreases over time. You might opt for DTA because your life insurance policy is intended solely to cover your share of a repayment mortgage, and your family will therefore need a smaller payout from your insurer if you die later.
4. Make sure you buy enough cover
When deciding how much life cover you need, make sure you carefully consider the financial impact your death would have on your family.
It's likely that the bulk of any payment your family received upon your death would be used to pay off your mortgage.
However, it's important to make sure any other outstanding debts, such ascredit card and loan balances, are covered too; if they aren't, your loved-ones will be left to pay them off out of your estate.
It's also important to consider how much your family would need to live on if your income was suddenly lost. Make sure your life insurance payout would cover any household expenses that couldn't be met in your absence.
5. Set up your policy in trust
A trust is a free and simple way to ensure that an asset you've put aside will benefit the people it is intended for.
If you don't put your life insurance policy in trust, the sum it pays out will automatically become part of your estate when you die and will be subject to inheritance tax (IHT).
Currently, this means that for every £100,000 paid out by your insurer your family could face a £40,000 IHT bill!
Luckily, putting your policy in trust is simple; all it requires is that you fill in the correct forms.
6. Consider single life insurance policies instead of joint cover
In previous years, it was often significantly cheaper for a couple to buy a joint life insurance policy than for each partner to insure their life separately.
However, it may now only cost slightly more to buy two life insurance policies instead of joint cover.
Doing so could provide your family with double the amount of protection, so it's worth investigating both options before committing to either joint or individual cover.
7. Be honest and accurate when you fill in your application forms
When you apply for any kind of insurance, it is crucial to ensure you honestly and accurately supply your provider with all the information they require.
If you fail to disclose essential facts – for example, by forgetting (or omitting) to mention a pre-existing medical condition to your life insurer – the company could refuse to pay out in the event of your death.
8. Don't forget to review your level of cover regularly
Finally, it's important to remember that life insurance isn't a financial product you can buy and then neglect. In order to ensure your policy offers you and your family the protection you really need, it's vital to regularly review your level of cover.
Life changing events such as having another baby or moving house can seriously affect how much life insurance you need – so make sure you re-think your requirements when something significant happens to you.
You can find out more about how people's life insurance needs change over time by reading this article.
**Articles featured on BeatThatQuote.com are for information purposes only and reflect the views of individual writers. Articles are not, and should not be considered as, financial advice. BeatThatQuote.com strongly encourages our readers not to rely solely on information contained within our website, but to conduct their own research and seek independent advice about the financial products they purchase.**
0 comments:
Post a Comment