Top Life Insurance Tips

Building up your savings is not something that happens overnight, it takes time. Sudden death can mean that your family’s savings can be spent almost in an instant. It therefore makes a lot of sense to put safety nets in place to protect your family’s finances.

The best way to decide whether you actually need life insurance is for you to imagine what would happen to your family, if your income was no longer there as the worst had happened to you.

Here are top 9 tips to take into account when buying life insurance.

1.    Buy enough cover. Your mortgage will probably be your biggest debt so you need to cover that. Additionally to that you should provide at least £150,000 for every young child you have. This will increase significantly if you want to put your children through private schooling.

2.    Watch out for terminal illness cover on life plans. This will pay out the sum assured if you are diagnosed with a terminal illness and have less than 12 months to live. All the policies offered by Click automatically include terminal illness cover.

3.    Consider two single life policies instead of one joint life policy which can only payout once on the first claim. Two single life policies effectively provide double the cover for couples. A joint life policy will not leave the surviving partner with any cover later in life. With their own single policy they are still insured.

4.     Ask your insurer to write your policy in Trust. Under current Inheritance Tax Legislation, for every £100,000 of life assurance you will have a potential £40,000 tax bill if your estate exceeds the current inheritance tax threshold. Writing your policy in trust only requires you to complete one extra form and the insurance company will do all the rest for you. Your insurer will also provide this service free of charge.

5.     The sixth most common cause of a claim under the critical illness cover, relates to children. (Critical Illness cover is commonly added as an optional extra to a life insurance policy. This cover can also be bought as a stand alone policy). If you are going to add critical illness cover, make sure the policy also includes cover for your children. Most critical illness provisions automatically include £20,000 cover for each of your children. Check it out.

6.    Critical illness policies will only pay out for the serious medical conditions listed on the policy. So always carefully read the policy documents carefully and understand what’s covered before you buy.

7.    Your sum assured should increase as your mortgage or family does. So if you have what’s called a “guaranteed insurability option” included on your policy, use it! With this option, you have the right to increase your cover at certain stages in life, without any further underwriting. This means that if your health has deteriorated since you first bought the policy, you can still increase your cover. This comes in very useful when for example, you get married, you buy a new home or a child is born.

8.    Don’t over-insure yourself. Take into account how much cover you already have. Remember, many employers include life insurance cover within their employee benefit packages. They may also income protection and critical illness insurance. Life insurance may be called death-in-service benefit, while income protection can be called long-term disability benefit or permanent health insurance. Check out you contract of employment.

9.    When you complete your life insurance application form make sure you disclose everything remotely relevant. If you are in doubt, especially if it is medically related, tell your insurer. If you conveniently “forget” to mention even a minor health issue it could have devastating consequences later on. If there is a claim, the insurance company always makes extensive inquiries to verify the claim and this could turn up significant problems due to non-disclosure. Whether it is smoking habits, a bad back or occasional pins and needles, make sure your insurers know.