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Buying life insurance: What and how much?
The importance of insurance cannot be overemphasised. However, many people are reluctant to discuss the importance of buying life insurance, while there are others who are just unaware of its importance. The reluctance to be insured can be traced to the fact that untimely death is a reality we live in denial of and discourages us from paying for something we somehow think is least probable.
Between plain ignorance and reluctance lies the golden mean of being adequately covered. A pervious article listed out the various reasons for an individual to consider being adequately protected.
In general terms, buying life insurance online can save money as it cuts out the intermediary. At truelifeinsurance.co.uk, we search over 300 plans from leading insurance companies to find the ideal insurance product for you at a price no one else can beat. Once you have identified the right product, here are some additional things to look out for:
What type of insurance is right for me?
All policies are not the same, rather, they are meant to address different situations of individuals. Your choice should be based on your own needs and affordability. As mentioned in another article, there broadly are two categories of life insurance products - term assurance and investment-type. Term insurance generally has lower premiums especially in the initial years but they do not build up any savings that you can use in the future. However, term insurance (term assurance) offers the largest insurance protection for every insurance pound you spend.
There are different types of term insurance products. You should decide which one to go for based on your age, income, family size and circumstances. A professional insurance adviser will give you impartial opinion on what type of insurance to go in for. At truelifeinsurance.co.uk, we are committed to finding you the right insurance product at the lowest cost.
How much cover do I need?
There are a few questions you should ask yourself to decide how much insurance you should take out.
- How many people are financially dependent on me? Apart from my spouse and children, are there parents, grandparents, brothers or sisters who depend on you?
- How much of the family's income is contributed by me? Were I to die early, how would my survivors, especially the younger ones, manage?
- Do I have children, for whom, I should set aside cash for their education?
- How much of debt do I have? How will my family repay it in the event of my death?
- Will there be any inheritance tax or other taxes to be paid consequent on my death? If so, how will it be paid?
- What will be the effect of inflation on my family's future lifestyle? How do I take care of it?
Once you arrive at a figure to match these needs, count the total life insurance you have now including any that has been provided by the employer. Add other assets you have: gold, silver, savings, real estate, investments and personal property. Together these will give you a fair idea of how much cover you need.
- Written in Trust: If your policy is written in trust, should a claim arise, the money goes directly to the assignee (the person you nominate). It also avoids inheritance tax, which translates into a 40% tax saving.
- Critical illness: A life insurance policy with critical illness cover works out cheaper than having two separate policies to cover death and critical illness. It is important to know that insurers make a distinction between critical illness and terminal illness. Most insurance policies have terminal illness already covered, but a critical illness policy will pay out the lump sum in the event of a critical illness to the insured with no life expectancy conditions.
- Joint life insurance: - A joint life insurance is normally written on a first death basis, meaning the payment falls due upon the death of the first policyholder. While it helps save money, it should be borne in mind that it may leave the second policyholder to look for a new life insurance policy at a higher premium in his or her old age. Thus whatever is saved initially can be more than lost in such situations.
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