Getting a good life policy in place is crucial, especially if you have a mortgage or financial dependents. Here are 6 tips to make sure you get it right.
1. Get life insurance while you’re still young
Even if you don’t have a mortgage or a family right now, you might do in the future – and life insurance is muchcheaper if you start your policy while you’re still young and healthy. If you are a non-smoker, aged under 35 with no serious health issues, it’s possible to get cover for as little as £10 a month.Once your policy has started, your monthly premiums will stay the same for the length of the term – even if you develop health problems later.
Acting now could save you a huge financial headache later in life!
2. Quit smoking
This one may be easier said than done, but it will make a drastic difference to the cost of your cover. Most insurance companies will consider you to be a non-smoker if you haven’t smoked in the last twelve months.
3. Choose the right kind of cover
There are two main types of life insurance – Level Term Assuranceand Decreasing Term Assurance.
With Level Term Assurance your family will receive a fixed lump sum of money if you die. It wouldn’t make any difference if you died tomorrow or twenty years from now, the amount paid out will be the same. Although this is the most popular type of life cover, not everybody needs it.
Decreasing Term Assurance works a little differently. Its main purpose is to leave your family enough money to pay off the remainder of your mortgage if something happened to you. Because the size of your mortgage reduces over time, so does the level of protection from your insurance policy. So it doesn’t offer quite as much protection as level-term, but it is cheaper.
4. Buy life and critical illness cover together
Critical illness cover will pay money out if you become too ill to work – e.g. due to an injury or serious illness. It can usually be added to your life insurance as an extra, which is cheaper than buying them as two separate policies. Be sure to keep this in mind when you’re getting quotes.
5. Don’t buy your life insurance from your mortgage lender
If you are applying for a mortgage, the lending company will often insist that you have life insurance in place before they approve you. They may try to persuade you to buy your life insurance from their ‘recommended partner’, but don’t feel like you have to. It is likely that the lender will be earning commission from doing this, but it’s also likely that you can get a better deal by looking elsewhere. Doing so won’t affect your chances of being accepted.
6. Shop around!
Make sure you compare prices from several insurers. If you find the whole process a little confusing or overwhelming, there are organisations who can help. Companies such as the Gladstone Brookes Money Club can talk you through the process, answer any questions you may have, help make sure you are getting the most appropriate type of cover, and compare prices from several companies for you.
It’s a big decision, so make sure you get it right!