Looking for life insurance can be a confusing business. How much cover do you need? Level Term Assurance or Decreasing Term Assurance? Should you include Critical Illness or Terminal Illness? What about Guaranteed Insurability Options? The choices are endless and the risk of getting it wrong are great. This week we suggest 10 ways to make sure you and your dependents are properly covered at the right price.
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10 Tips For Top Life Insurance
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1. Start When You're Young
Many people feel that they don't need life insurance when they're young. However, it's much, much cheaper to buy cover the younger you are. This means that it is often cheaper in the long run to buy cover at an early age rather than waiting until you're older.
2. Review Your Cover Often
It's tempting just to take out life cover and then forget about it. However, there are very good reasons for reviewing your cover often. Your circumstances will change as you go through life meaning that the amount of cover you need will change - you may have children, buy a house or get married - all of these are likely to mean that you need to increase your life cover. On the other hand, the cost of life cover can change as well. Today, life cover is much cheaper than it was a few years ago. This means that many people can benefit from a reduction in their premiums if they review their cover now.
3. Understand the Difference between Reviewable and Guaranteed Premiums
When comparing prices make sure you are comparing like with like. Life insurance policies fall into two categories - those with guaranteed premiums throughout the term and those where the premium will be reviewed (i.e. go up) every few years. A reviewable premium will be cheaper initially but is likely to be more expensive in the long run.
4. Make Sure You've Got the Right Amount of Cover
To ensure that your dependents are adequately covered it's important to make sure you've got enough cover. Broadly speaking, you should have enough cover to ensure that your mortgage and other debts will be cleared with enough left over to provide around 66% of your usual income. An IFA or life insurance broker will be able to guide you through and help you ascertain exactly how much cover you need.
5. Make Sure the Policy is Written in Trust
In most cases, life insurance should be put in trust for your dependents. This not only means that the proceeds can be paid out without delay it will also avoid the proceeds becoming subject to inheritance tax. Again, your IFA or life insurance broker will be able to advise on how you go about this.
6. Understand the Difference Between Decreasing and Level Term Assurance
There are broadly two types of basic life insurance. Level Term Assurance where the value of the policy stays constant throughout the term and Decreasing Term Assurance where the level of the cover is reducing year on year. Decreasing Term Assurance can be used to cover a repayment (capital & interest mortgage) where the debt is reducing throughout the term and can provide cheaper cover than a level term assurance policy.Continued....
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