Five reasons to search for the right life insurance policy

Nobody wants to think about death, but in reality we also want to be safe in the knowledge that should we not be around to support our loved ones they are protected financially.  The idea of life insurance also referred to as life assurance or term assurance is to provide such support.

Depending upon your circumstances everyone has different reasons for taking out a life insurance policy, some people may want to arrange for their mortgage to be paid off should they become terminally ill or pass away, others may want to protect their salary should they not be around to ensure their family’s standard of living isn’t affected, or to cover the costs of education and childcare.

Whatever the reasons for taking out a policy, it’s important to ensure that you not only get the best quote and find the right policy, but that you understand your policy and what it covers.  Moneyextra.com has listed the top 5 tips for finding the right cover.

1 Because you have a mortgage!  Anyone who has a mortgage and dependants should ensure that they have a suitable life assurance policy in place.  This needn’t be expensive and by shopping around for the best premium, cheap life cover can be easily obtained.  Monthly premiums for life insurance have fallen over recent years so even if you bought a policy years ago, there’s every possibility you can save money on what you are currently paying.  The cost of life insurance has dropped, largely due to increased completion in the market place, but also a contributing factor being that we are now living healthier lifestyles than 15 or 20 years ago, and premiums can now be obtained for less than the cost of a bottle of wine!  You may also want to consider a life insurance policy that comes with critical illness cover as this will almost certainly work out cheaper than buying two separate policies.  Most life insurance policies will automatically include terminal illness cover however the critical illness policy will pay out the lump sum for a range of illnesses with no life expectancy criteria.

2 Don’t rely on any state payments.  Whilst the state will assist a bereaved partner in certain cases, it’s highly unlikely it will be able to maintain any mortgage payments or school fees, so no matter what your budget, some cover is better than having none at all.

3 Consider any pre-existing medical conditions when applying.  It’s likely that a standard policy won’t provide cover for any pre-existing illness, however any condition not related will be covered, so always be truthful when applying for cover.

4 Don’t assume if you have cover through your employers that this will be sufficient.  Typically these policies only pay out 3 or 4 times of your income, and should you change employers this cover is usually lost.

5 Look at the type of premium that applies to your policy.  There are two types of premium available, the first being guaranteed and the second reviewable.  Guaranteed premiums will ensure that the life insurance company can never increase the premium from what you initially pay, whereas with reviewable premiums you are agreeing that your life insurer can review your policy at certain intervals.  Although to begin with reviewable premiums may be cheaper, they are likely to increase over the course of the policy so in the longer term you maybe better of opting for the guaranteed premium.

There are many other areas of life insurance that are important, however overall it is important to ensure you have sufficient cover to clear debts and any mortgage, as well as allowing your loved ones to maintain their standard of living, however being realistic it’s also important to ensure you have cover at a manageable cost which can easily be obtained by shopping around and comparing various life insurance quotes and also the finer details behind the numerous policy available.

Moneyextra.com recommends you take independent financial advice before acting on any article

2009-08-11 10:55:48 © Moneyextra.com