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Do I need Life Insurance?
Building up your wealth and finances takes time, but any unexpected event can mean you lose much of it in an instant, so it makes sense to come up with a safety plan. This safety plan is life insurance. Without it, imagine what would happen to your family if one day you were not around. Critical illness insurance pays a lumps sum if you are diagnosed with a life-threatening condition such as multiple sclerosis, a stroke, heart attack or cancer.
Below are ten top tips to help you gain knowledge so both your health and life are protected.
- Buy enough cover: Think about covering debts such as your mortgage and then provide a further sum amount such as £150,000 for every young child you have, this amount will increase if you need to pay for school fees, transport costs etc.
- Terminal illness benefits: Look out for terminal illness benefits on the life plan. This pays out the sum assured if you are diagnosed with a terminal illness and have less than 12 months to live.
- Different life policies: Consider single life cover instead of joint life policies. Buying two single life policies potentially provides double the cover for couples and it does not leave the surviving partner without cover later in life. This policy will only cover a few percent more.
- Consider taxation: Under the current IHT legislation, every £100,000 of life assurance is a potential £40,000 tax bill, so therefore ask your insurer to write your policy in trust. This is a simple and free way to ensure that the tax man will not take a percentage of your loved one’s money.
- Children: Many critical illness insurance policies automatically include cover worth up to £20,000 for children. This is the sixth most common cause of claim, so it is a useful benefit for parents to have.Unlike income protection, critical illness policies only pay out for those conditions listed under the plan, so always read the small print policy documents carefully before you commit, this way you will know what is covered and what is not.
- Insurability Options: As your family and mortgage grows, so should your sum assured, so exercise your guaranteed insurability options. At certain life stages such as the birth of a child, a marriage or buying a new house, you automatically have the right to increase your cover at no extra cost and without the need for a medical.
- Check what cover you already have: Income protection, life insurance and less commonly critical illness insurance can be included in employee benefits packages. Life insurance can sometimes be known as ‘death-in-service benefit’, whilst income protection is also known as ‘long-term disability benefit’ or ‘permanent health insurance.’ Therefore avoid over0insuring by checking how much cover you’ve already got.
- Be honest: Forgetting to mention a seemingly small health issue could result in your policy not paying due to non-disclosure. Whether it’s smoking habits or a bad back make sure you tell your insurance company everything, if it doubt, again tell your insurer.
- Shop around: Even if you may have purchased your life insurance policy ten years ago, premiums change, so it is worth researching every few years to see if you can find a better deal. Be careful though; do not just consider the size of the premiums as you could end up losing valuable benefits by switching to a superficially cheaper deal.
- Changes: Should your circumstances change it is worth reviewing your policy. If you’ve already set up a life insurance policy it is easy to forget, especially when changes come around such as the birth of a new child. Therefore review your policy as the level of cover should change in accordance.
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