Life Insurance - Money saving Top Topis
More and more people are buying life insurance online and the
numbers seem to be doubling every two years. The reasons are
clear. Prices are lower on the Internet and life insurance is
fundamentally a simple insurance product.
Despite the underlying simplicity of life insurance, most web
sites channel their online clients through a telephone based
help and advice service manned by experienced personnel. They
represent your safety net so if a little technical knowledge is
called for, help is at hand.
But it’s always a good idea to have a few Top Tips in
your back pocket when you’re shopping online for life
insurance. They’ll help you ask the right questions and
find the best policy.
1. Always have your Life Insurance policy “Written in
Trust”.
This means that in the event of a claim, the money goes
directly and immediately to the person(s) you nominate when you
first take the policy out. It also avoids all possibility of
your estate having to pay Inheritance Tax on the proceeds of
your policy and that could represent a 40% tax saving !
All you have to do is tell the online brokerage organising your
policy that you want your policy “Written in Trust”
and the names of the people who the life insurance company pay
in the event of a claim. They will then sort it all out for you.
The extra good news is that this service is invariably free of
charge. So it’s a win win situation and there aren’t
many of those around these days !
2. In the early years a Reviewable Life Insurance Policy
will be cheaper but a Guaranteed Policy will work out a better
buy in the longer term.
With a “Guaranteed Policy” the insurance company
guarantees never to increase your policy’s premium.
With a “Reviewable Policy” you agree that your
insurance company can review the cost of your policy at regular
intervals. But don’t be kidded – in our experience a
“review” is just another word for a price increase.
After all, who’s ever heard of an insurance company
passing up a chance to charge you more! The review intervals are
usually between 2 to 5 years but this does vary between
insurance companies. You will find the details of the review
intervals on the documents sent to you before you accept the
insurance – these are called The Key Features Documents.
So, comparing otherwise like for like policies, in the early
years the premiums for a “Reviewable Policy” will
undoubtedly be lower than the premiums for a “Guaranteed
Policy”. Thereafter, the premiums for a Reviewable Policy
increase eventually catching up with and overtaking, the premium
for a “Guaranteed Policy”.
In our experience, you can expect the monthly premiums for a
Reviewable Policy to exceed those of a Guaranteed policy in
about 7 to 10 years and then within the following 10 years, more
than double again. If your budget is currently tight then by all
means choose a Reviewable Policy - after all your salary may
increase in coming years and ease the strain. On the other hand,
if the premiums for a Guaranteed Policy are affordable, we think
they represent your best buy.
A footnote. Many insurance companies have stopped offering
“Guaranteed” rates for standalone critical illness
insurance policies. This because they have experienced much
higher claim rates than they initially expected. However, you
may still find a Guaranteed life
insurance policy that also provides critical illness cover.
As we have explained, “Guaranteed” rates are
especially good value and if you can get a quote for a
Guaranteed life policy that includes critical illness cover, you
may have a real bargain.
3. Thinking about a Joint Life Insurance Policy?
A Joint Life Insurance policy is usually written on a first
death basis. This means that the policy will pay out on the
death of the first policyholder, subject to the policy being in
force at the time. This leaves the second person uninsured and
older. Older people can struggle to get life insurance at an
affordable premium, so rather than a Joint Policy consider
taking out separate policies now. Overall it will work out a
little dearer - but you get twice the cover and double the peace
of mind.
4. Taking out a Life Insurance Policy? Now would be an ideal
time to include Critical Illness cover.
Are you likely to need Critical Illness Insurance in the
future? Yes? Then consider adding it now to the life insurance
policy you’re arranging. Why? There are three reasons.
Firstly, a Life Insurance policy combined with Critical Illness
cover will work out significantly cheaper than buying two
separate policies. Secondly, as we have already explained in the
footnote to Tip 2, you may be able to buy a combined Life and
Critical Illness policy with a guaranteed premium. That could be
a real bargain. Finally, premiums for critical illness cover
increase rapidly as you get older – so the sooner you take
it out, the cheaper it will be.
5. Don’t confuse Terminal Illness cover with Critical
Illness cover.
There’s world of difference between Terminal Illness and
Critical Illness cover so it’s important to understand the
difference.
Terminal Illness cover pays out the insured lump sum if a
Medical Doctor diagnoses you with an illness from which the
Doctor expects you to die within 12 months. Most good
life policies automatically include Terminal Illness cover at no
extra cost. It’s basically an early, and welcome policy
payout.
A Critical Illness policy pays out the insured lump sum if you
are diagnosed with one of a wide range chronic illness and
there is no life expectancy criteria. Indeed, with many of
the insured illnesses you could expect to survive for many
years. For example: certain cancers, heart disease, stroke,
multiple sclerosis, loss of speech, sight or hearing, onset of
Parkinsons or Alzheimers disease, third degree burns etc. Say
you were an engineer aged 40 and you lost your sight. A Critical
Illness policy would pay out immediately and that money could
well be vital in helping you and your family through many
difficult financial years ahead. If you just had Terminal
Illness cover there’d be no chance of a payout.
So as you can see, Critical Illness cover is far more
comprehensive than simple Terminal Illness cover and for that
reason critical illness cover always costs you extra.
© 2005 Andromeda Webs Ltd. All Rights Reserved Worldwide.
Author: Michael Challiner,
email michael@andromedawebs.co.uk Editor of Express Life
Insurance, Andromeda Webs Ltd.
Tel. ++ 1477 535920
www.express-life-insurance.co.uk