The loss of a family member is devastating and the further loss of financial security can pile stress onto their grief. Life insurance is the best way to arrange for your family to have financial support if the worst should happen. Getting life cover quotes can seem like a minefield to negotiate, but by following these five top tips, buying the best cover for you couldn’t be easier.
The payout should be 10X the highest earner’s salary
The general rule is that you need to buy life insurance cover that equals 10 times the main earner’s salary. However, it is better to cover as much as you can afford than to have no cover at all. When you are looking at life cover quotes the best way to work out how much you need is to look at your current outgoings and budget. You will need to consider any outstanding debts that you currently have, including how much you owe on your mortgage, funeral expenses that are incurred after a death, immediate lifestyle spending and future outgoings such as university fees.
Although looking for life cover quotes that cover 10 times your income seems a lot remember that inflation will make the payout in 10 or 20 years time, worth less in real terms than it is now.
Two Single Policies Can be Better Value than a Joint Cover Policy
When buying family life insurance, you can buy a single policy per individual or a joint policy for a couple. You will probably find that when you get your life cover quotes that a joint policy is a little cheaper, but remember, a joint policy will only pay out once, most commonly on the first death. When you’re deciding whether to go for an individual or joint policy consider the merits of each quote; the positives of a joint policy are that it will probably be cheaper, as already mentioned, and if you’re married but have no dependent children then it can be easier to set up. The negatives of a joint life insurance policy are that you will only get one payout and that if you were to break up with your partner you would probably want to cancel the policy and reinsure as a single policy holder which would end up being more expensive based on new age and health details.
If you buy two single policies the benefits are twofold, firstly each policy will pay out separately rather than just once with a joint policy. Secondly, if you split from your partner then you won’t have to buy a different policy. The negative of buying two policies is that the premium for each is likely to cost more.
Your premium is protected if the provider goes bankrupt.
Life insurance is a long term financial investment, you are usually looking at a minimum of 10 years and a lot of things can happen during that time, including the possibility of your insurer having financial problems themselves.
If your insurance company goes bankrupt, the Financial Services Compensation Scheme (FSCS) will search for another insurer to take over your policy without causing you any difficulty. If you have current claims in progress at the time your provider goes bust, or you need to claim before the FSCS finds a new insurer, then they should ensure any replacement life cover quotes are from suitable companies who are UK registered.
If you have bought your policy through a broker then you are likely to have paid an arrangement fee of around £25 or so. If you subsequently find that your broker has gone bankrupt after you paid the fee, but before your life insurance has been organised then you’re unlikely to see that fee again unfortunately. It would still be worth appealing to the FSCS if you have paid any premiums to the financial advisor to a policy they have arranged as these may be recoverable.
Buying insurance policies direct from banks and building societies may cost you more
When people are looking for life insurance quotes they often start by checking out the products offered at their own bank or building society, stopping there however could mean that your premiums cost more than they should. This is because some lenders add their own markup to financial products without letting the customer know. The price difference between the most expensive and cheapest policy calculated over the whole term could mount up to thousands of pounds.
The best places to look for life insurance quotes is often via either a broker or an intermediary comparison website which compares a variety of policies from a range of lenders. When considering policies you will often be offered two choices of premium, either guaranteed or reviewable. If you choose to guarantee the premium you will always be paying the same monthly amount for your life insurance which will help you budget. If you choose to pay reviewable premiums they will be cheaper initially but the price can be raised by the insurer further into the term leaving you paying more as you get older.
If your policy is written in trust you’ll save a big chunk in tax
When you die your life insurance payout is part of the estate you leave behind, which if the whole estate is worth more than the inheritance tax threshold then your dependents could end up having to pay a large sum in inheritance tax. This scenario won’t happen though if you write the policy in trust, at the time it is taken out. Writing the policy in trust is fairly common and ensures that the policy payout goes directly to your dependents and never forms part of your estate, if you’re interested in exploring this option you can let the provider themselves know or take the advice of an independent financial adviser.
Trying to arrange life insurance cover and compare various quotes can be confusingbut if you follow these five top tips on making the best decisions the process will be much simpler. From how much cover to buy, to where to get the best life cover quotes, this insider info will give you the confidence that you need to make the right choices.