Have you considered what would happen to your family, financially, if you died? Would the mortgage get paid? Is there enough in the bank to pay the kids tuition fees? You don’t even need to be in employment to have life insurance, you could be a stay at home parent where the cost of childcare would increase drastically without you. So, it’s important to think about life insurance no matter what your circumstances.
Term Insurance is the most common type of life insurance
- This pays out when the policyholder dies within a set time period, often 10-25 years (you can specify the period).
- If the policyholder is diagnosed with a terminal illness or dies within the set time, the insurer will pay the agreed amount.
- If the policyholder dies after the term they will not receive a pay out.
- If the policyholder dies within a short space of time after taking out the insurance, the insurer might not pay out due to suspicious circumstances – read the policy wording carefully.
There are 3 types of Term Insurance
- Level Term: where the sum assured is the same at the policy start and end date.
- Decreasing Term: often used for mortgage repayments, the pay out decreases over time as the mortgage repayments decrease.
- Increasing Term: the pay out increases over time along with for example, the cost of living.
How long do I need to have cover?
You must consider what outstanding debts you have when choosing your life insurance, like a mortgage, personal loans or credit cards. Depending on your debt you may want to; leave a lump sum; take out a policy that will cover the mortgage for a set period; or cover finances until your children become independent.
How much cover do I need?
You’ll need to calculate your debts and the cost of living for your family to determine how much money they would need if you died.
What does it cost?
The older you are when you take it out the more life insurance costs; it is typical to take out cover between ages 35 – 55 when you are likely to have the most dependants/debts. The insurer will look at your age, health and occupation when making the decision to cover you so naturally the healthier you are the better, smokers are penalised! Life insurance premiums can be guaranteed meaning they won’t change over time, or reviewable, meaning they might rise should your personal circumstances change.
We’re a couple, should we get joint cover?
You can take out life insurance as an individual or a couple. Joint insurance will only pay out on the first death, leaving the second person without cover which can be an issue as it is then more expensive and difficult to get new cover later in life. If both individuals have separate policies they can benefit from different amounts and different terms.
In order to make the insurance as tax efficient as possible you can take your policy out ‘in trust’ which means that the money will not be added to your estate and therefore will not be liable for inheritance tax.
Insurance Tailors does not directly provide Life Insurance but we’ve put together a panel of trusted providers who we’re confident can meet expectations. Get in touch with us on email@example.com or call us on 0207 199 3258.