There comes a time in everyone’s life when life insurance becomes a necessity. Maybe you have just secured your first mortgage or, perhaps, you have just held your new-born child for the first time.
Suddenly, even if you have been denying it for years, you have become an adult. Whilst this does not mean you need to be in bed by 9pm every night with a good book, it does mean you need to embrace your new-found responsibilities.
And this is where life insurance comes into play. It may seem like a scary prospect, thinking about a life where you are no longer around, especially when your adult life is just beginning. But, if you have loved ones who rely on you financially, it is your responsibility to make sure they would be ok if the worst were to happen.
Life insurance does not have to be daunting and here are our 5 top tips…
- Questions, questions, questions!
How old are you? How much do you weigh? What is your occupation? Do you smoke?
Be prepared for a lot of questions, ranging from your age and smoking status to weight/BMI and occupation, amongst others. However, there is a reason behind all this.
The more answers that are provided to the insurer, the easier it is to find you accurate life insurance quotes which are personalised to cover all your unique needs.
Let’s say you did provide the wrong information. You could find this leads to paying higher premiums (if you take out more cover than you require) or a pay out being denied.
If you have a pre-existing condition (by pre-existing, we mean it currently exists or existed at the point of application), then insurers will need to know additional information about how it affects your life. Things like if you have had to take time off from work or if you have been hospitalised.
While it may not be a topic that you like to discuss, insurers are a professional bunch who will not judge. In fact, most life insurance companies will try their best to put you at ease.
- Do not lie on your application
So, you notice people who do not smoke pay less for their life cover, as do those who are younger. So, you think to yourself, why don’t I withhold or provide false details?
Well, you technically could, but you may be wasting your money as your family may not receive a pay out when the time comes.
Intentionally lying on an application will result in what is called “non-disclosure” in the life insurance world. This means that if you were to pass away from, say, a smoking related condition, but said you were not a smoker, the company you are insured with would be able to investigate the cause of your death further. If it is proven you have lied on your application, your family would not receive the lump sum pay out and you would have wasted your money paying monthly premiums.
The good news is that companies like life insurance broker Reassured and Cavendish can walk you through every step of the application, in case you are worried you will unintentionally make a mistake. Insurers want to make sure you have got the necessary cover, so you have the peace of mind.
- Secure an affordable policy which is relevant to you
Now you have answered all the personal questions truthfully, the next step of the application process is finding a relevant life insurance policy to meet your specific needs.
Ask yourself why you want to secure life insurance? Is it for your children’s future? Is it to keep the roof over your family’s heads if you pass away? Or maybe something like covering funeral costs so your loved ones don’t have to? Knowing your reasons for obtaining life insurance can make the process of taking out a policy much easier.
Life insurance policies are split into term-based life insurance and whole of life insurance. Term-based cover lasts for a set period (up to 40 years) and will only pay out if you pass away within the set term.
Term life insurance can provide either a level or decreasing pay out. Level term life insurance pays out a fixed amount if you pass away during the term, and decreasing term life insurance pays out an amount which reduces throughout the policy term.
Whole of life insurance is a type of life assurance and as the name suggests, it lasts for life. Whether you live to 50, or 150, it won’t make a difference as a pay out is guaranteed.
There is also over 50s life insurance (sometimes referred to as over 50 plans). This is similar to whole of life insurance, except it only covers UK residents aged between 50 – 85 and requires no medical information. If you fit within this age range, you will be guaranteed accepted, regardless of your health.
While whole of life insurance may sound like the best option, to compensate for the guaranteed pay out, the monthly premiums are significantly higher than term-based insurance. And, if you take out a policy too young, you could pay more than the sum assured (the amount your family will receive) over the policies length.
Let’s look back at why you’re securing life insurance. If you want to protect a repayment mortgage, decreasing term life insurance is an ideal option as your sum assured can reduce in line with your remaining balance. If you have other large debts and family living costs to protect, level term life insurance has the potential to provide a large fixed sum to cover these costs.
Alternatively, if you are looking to provide an inheritance or cover rising funeral costs for loved ones, whole of life insurance or an over 50s plan can guarantee a pay out to cover these.
Premiums are fixed on policies, so you want to make sure you are paying an amount that reflects your situation
- Plan for the future
If the last couple of years have taught us anything, it is that anything can happen to turn the world completely on its head.
While we are not expecting you to predict the future, it is worth considering things like potential inflation and cost of living rises with your policy. This can impact your disposable income, which affects your ability to pay your monthly premiums and may result in a higher sum assured being required.
According to extensive research from award-winning UK broker Reassured, the average cost of term life insurance is currently £38.15 per month. This average figure is based on 142,576 policies sold between 08/09/21 – 08/09/22, with an average cover amount of £151.972.
You may also have dreams of getting married or having a child or two, so you need to take this into consideration too. Once your policy is active, not all insurers allow you to make changes unless there is a special events clause.
This is a clause that lets you make changes to your policy (such as increasing your cover amount) without needing to provide new medical information.
If you had to secure an additional policy (alongside your current one) or cancel your policy and take out a completely new one to reflect your new circumstances, you may be looking at an increased price. This will be due to potentially paying two premiums or the fact you will be older, with less favourable health, and a higher risk from the insurers’ perspective.
- Use a life insurance broker or a comparison website to compare quotes
While taking out life insurance can seem like a lengthy process, it is worth it in the end for reassuring peace of mind it provides, especially if you have young children.
The process can be a lot simpler if you let a life insurance broker do the work for you.
A reputable broker can compare multiple quotes for you from a range of top UK providers. They can help you secure no-obligation quotes that are personalised and often completely fee-free.
They can also do most of the legwork for you, and help you secure a policy which covers your requirements. They can go through why you need cover and provide you with the most suitable options – walking you through the application process and ensuring all your details are accurate.
Of course, a life insurance broker cannot pick a policy for you. They can, however, give you all the information you require and compare quotes to help you make an informed decision.
If you do not require help through the application process and just need to compare multiple quotes, then a comparison website could also be a good option.
It is certainly easier then struggling through the process alone!
So, you have read our 5 top tips for getting the most out of life insurance in 2022 and we hope it has been helpful.
Do not be put off by life insurance. It might sound scary, but if you are reading this, you will have done so much already. Lastly, remember, the younger you are when you take out cover the cheaper your premiums will be, so why not seize the day – besides, you are an adult now.
