1. Don’t put it off – it will cost you more as you get older!
The sooner you take life cover out the better, as the younger and healthier you are, the cheaper your life insurance premiums will be.
Bear in mind that if you’re a smoker or have a pre-existing medical condition you will pay more, as you are at a heightened risk of dying early. The important thing to note though is that you will still be able to get insurance.
2. You still need cover even if you are not earning
The value of a stay-at-home mum (or dad) shouldn’t be underestimated – Legal & General calculates that it would cost £30,032 a year to pay for the work they do.
So if one person in the household currently stays at home to look after the children, you need to think about insurance for them too, as if they were no longer around, the remaining partner would have to fund childcare costs.
3. You should buy cover through an adviser
Many people buy cover online, but do they shop around for the best deal? do they read the small print? are their needs correctly covered? is all information disclosed properly? Always go through their independent financial adviser or through specialist broker.
4. Check existing benefits before buying cover
Before buying life insurance, find out if you have any existing benefits with your employer, such as Death in Service cover, so that you don’t end up paying for more cover than you need.
5. You can buy cover for a set term
Term life insurance, otherwise known as term assurance, is the most basic form of life insurance and the least expensive. It covers you for a fixed period, generally the length of your mortgage or until all of your children have will have finished their education, and pays out a single lump sum of money if a person dies during the policy term.
6. You can buy a whole-of-life policy
As its name suggests, a whole-of-life insurance policy provides cover for your whole life, rather than a set period of time. The problem with many whole-of-life policies sold in the past was that the payouts promised were linked to unrealistic investment returns. As a result, most insurers have either had to substantially bump up the cost of premiums, or reduce the level of cover.
If you have a whole-of-life plan and you don’t think the risks were properly explained to you at the outset, or you were sold a life insurance policy which will not cover your mortgage, then you may have grounds to complain that you were mis-sold.
7. Premiums can be fixed
Opting for a life insurance policy with guaranteed premiums gives you peace of mind that the cost of cover won’t suddenly shoot up a few years hence.
If you go for a policy with reviewable premiums, these are usually only guaranteed for the first five or 10 years, after which the insurer will reassess the cost.
8. You can buy cover that decreases along with your debts
Decreasing-term assurance is when the sum assured – what is paid out when you die – matches the amount you have outstanding on your mortgage. So as your mortgage gets smaller, so does the amount paid out by the insurer.
For example, if/when you take the policy out, your outstanding mortgage is £150,000, this is the sum that would be paid out to your beneficiaries if you were to die within the first year. If, in year 15, the amount you owe on your mortgage is £80,000, this is the sum that would be paid out. Your monthly premiums, however, don’t change.
9. You can buy cover with the same limit for the term of the policy
Level-term assurance pays out a fixed amount for the term of the policy, regardless of the size of your mortgage. Premiums are higher than those on decreasing-term life insurance, as you get the same-sized lump sum payment even if you only have a tiny amount left to pay on your mortgage.
10. You can add critical illness protection to your life policy
Critical illness insurance pays out following the diagnosis of a major illness such as cancer, heart attack, stroke or organ failure. This type of illness could prevent you from earning a living or looking after your family, so the proceeds of critical illness protection could be used to take care of your bills and expenses.
Don’t put life insurance off, make sure your family is adequately protected.
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