How to get the best life insurance policy
It’s a bit of a morbid subject , but life insuranceis a necessity if you have people that would suffer financially as a result of your death. If you’re single and have only yourself to think about, then life insurance is probably an unnecessary cost for you. So where should you start?
Pick a type of policy
Life insurance comes in many different forms so it is important that you pick the type that most suits your situation.
Level term: This type of insurance will pay out a level lump sum to your dependents if you die within a fixed term. Guaranteed whole-of-life: This type of policy doesn’t have a time limit, which can make them more pricey.
Decreasing term/Mortgage protection: The cover decreases over time. It is typically suited to those with a repayment mortgage, as the idea is you will owe less later on than you do now. Premiums are generally cheaper than other types of life insurance.
Increasing term: As you can probably deduce the amount paid out will increase over time. This is a good option to inflation-proof your policy as the cover you put in place today is unlikely to be worth the same in real terms in 20 years.
Family Income Benefit: This is a cheaper form of traditional life insurance. A family income benefit policy will pay a monthly income to your loved ones rather than a lump sum.
Tips for when you apply
There are a number of things to consider when applying, to ensure your loved ones are fully protected.
Be completely honest
When submitting an application, make sure you are completely transparent about you and your background. Honesty is the only way to prevent the insurer being able to claim ‘non-disclosure’ and avoid a pay-out.
Don’t scrimp on cover
Getting the full amount of protection for your loved ones is important so they are not left short once your gone. Also remember if you’re renewing a policy to make sure the cover you are applying for still suits your needs.
Consider using a trust
Life insurance is subject to Inheritance Tax as it forms part of your estate when you die. But by writing the policy in trust you avoid the lump sum becoming part of your estate.
Tips to keep the cost down
Life insurance is generally quite affordable. That said there are steps you need to take to keep the price affordable.
Keep healthy and safe
Premiums increase with the likelihood of death within a term. So if you have a risky job, like extreme sports and are overweight or a smoker, you will pay more. Losing weight or giving up smoking can help drive premiums down.
Get cover for as long as you need it
Think about what sort of cover you need and how long for. If you have children they only need it for as long as they would be reliant on you and for partners it is usually until pension age.
As with all financial products it pays to shop around. You don’t have to take the first policy you sign up with to the grave; every year review your cover and see if any other companies are able to offer a better deal.