How to buy life insurance
Life cover is one of the most straightforward insurance policies but you still need to do your homework before you buy. Allow Moneywise TV to provide a helping hand.
Death is hardly top of the list when it comes to dinner party conversation. But the irony is, it's only once you've got your life insurance fixed that you can really forget about it.
Life insurance pays a lump sum or monthly income if you die within the specified term of the policy.
That means if you have people that rely on you for money – such as a partner or children – it's a must-buy policy.
The first step is to work out how much you would need the policy to pay out.
This will depend on your mortgage and any other debts. Also think about living costs for your dependents.
Next you'll need to decide what type of policy to buy. With decreasing term plans the payout falls in line with your mortgage. This is the cheapest option but it's only suitable if you have a repayment mortgage. It may also not be recommended if you have a family to support too.
Level term life insurance pays a fixed amount during the term, regardless of your outstanding debt.
Couples may want to consider a joint policy – but the downside is it will only pay out if one of you dies, so you may decide it's worth insuring you both separately.
Cost will depend on a number of factors. The main one is your age, but your gender, health and profession will also be considered.
In an insurer's eyes this all amounts to an assessment of how likely you are to die– the greater the chance, the higher your premium. Premiums are fixed so it makes sense to buy cover when you're young and in good health.
There are other ways to save too such as shopping around on comparison websites. Premiums vary enormously but there is little point paying over the odds. After all, there shouldn't be any disputing whether or not you're dead
Stopping smoking, losing weight if you need to and generally looking after your health will also reduce your premiums.
Alternatively you can lower costs by opting to receive a monthly income rather than a lump sum
Your employer may already offer some 'death in service' cover- so find out first. If so, you can subtract this amount from your sum assured, which should also lower your premiums.
Putting your policy in Trust will ensure any payouts made will not be subject to Inheritance Tax –your insurer can provide the necessary paperwork
You can add critical illness cover to your policy too, which pays out if you suffer one of a list of diseases. This will bump up the price but could be the best money you ever spend.
Finally if you're unsure what to do or have health problems it may be worth speaking to an independent financial adviser.