Life Insurance: top 5 tips for consumers

Here are the top 5 tips that consumers should bear in mind when buying Life Insurance.

SHOP AROUND

GET THE RIGHT TYPE OF POLICY

BUY ENOUGH COVER

CONSIDER SINGLE LIFE INSTEAD OF JOINT LIFE POLICIES

USE A TRUST

The Life Insurance market can be very complicated to even the most experienced customer. Here are my 5 top tips on how to pick through all the options and choose the best policy to ensure your family is financially protected if the worst happens during the current economic turmoil.

1. SHOP AROUND

Always shop around and be careful not to trust your bank or any other tied source to provide the best price or advice. High Street mortgage lenders and supermarkets are usually tied to just one provider and can be very expensive. Make sure you speak to a company that is not tied to just one insurer and can advise you on the best policy for your own unique circumstances. Remember that no one insurance company can ever be competitive or suitable for everyone.

2. GET THE RIGHT TYPE OF POLICY

This might sound obvious; however, there are dozens of different types of life cover plans available. Known as 'Term Assurance' the most common form of life cover pays out should you pass away during a specific time period. However the amount of payout you receive can be level, increasing or even decreasing over time to protect a mortgage. Cover can also be paid as an income (known as Family Income Benefit) or a lump sum, and a range of other options are available including critical illness, waiver of premium, conversion, renewal and so forth. There are also policies that run until you pass away, regardless of when this may be, so either do your research or speak to someone who can guide you through these options.

3. BUY ENOUGH COVER

£100,000 might sound like a lot today, but in ten years time this is unlikely to produce more than a few thousand a year in income, which wont last very long at all. We don't believe that any set formula works for every individual; however, insuring any debts, such as the mortgage with an extra £150,000 per young child would be a good start.

4. CONSIDER SINGLE LIFE INSTEAD OF JOINT LIFE POLICIES

Traditionally joint life cover was far cheaper than a couple taking one policy each. However, in recent years this has changed. Buying two single policies potentially provides double the cover, doesn't leave a surviving partner without cover later in life and often only costs a few percent more. Couples should compare the price between the two options before buying.

5. USE A TRUST

Every £100,000 of life insurance is a potential £40,000 tax bill under current Inheritance Tax legislation. A trust is a free and simple way to ensure that the monies go to the right person quickly and, as any asset under trust is not considered part of your estate, upon death the pay out is not taxable. Delays in estate planning can often occur as it can take months, if not years, for probate to be granted. Assets in trust bypass such delays meaning that the monies are paid promptly.