When you have a family to think about, investing in life insurance makes perfect sense. Buying a policy that will offer the best protection for your dependents, however, is rarely simple. With the assortment of choices and the complexity of coverage to consider, educating yourself about life insurance is highly encouraged to get it right the first time.
The right life insurance offers valuable cover and protection but the wrong one is just like wasting your money. When your family needs the financial assistance most, the wrong type of policy won’t pay out. So, if you’re in the marketing for a life insurance policy, keep reading for a brief overview of the financial product.
Types of Life Insurance
In the UK, there are two types of life insurance to choose from. Each type has different protection coverage specific for different needs. The most basic is term insurance where you get to choose the amount and period you want insured. Your beneficiaries receive coverage if you die within the term. Otherwise no payouts are handed over and the premiums are not returned.
As opposed to selective term coverage promised by term insurance, whole-of-life policies are the type that offers coverage when you die regardless of the period. Your family will always get something out of the policy. The twist, however, is that the product is much more expensive than term insurance policies.
Things to Consider
At first glance, you might say that whole-of-life insurance policies are better even if they’re expensive. That may be true in some cases but not always. When it comes to life insurance, it takes more than looking at the surface coverage to get the right one. To avoid paying for policy premiums that won’t meet fully protect your family, keep the following considerations in mind:
Steer clear from low-start policies
These policies are advertised as low cost because of the low starting premiums you are required to pay for. While they are certainly attractive because of the presumed affordable cost, these policies are may be deceiving. What many policy holders don’t realize is that this kind of policies eventually rack up in cost as the months go by. What’s recommended instead is to buy a policy which requires the same monthly premium year after year.
Single is better than a joint policy
If you’re buying term insurance particularly the level term policy, you’ll have the single or joint options to choose from. Joint policies mean that the payout is made when either of the policy holders dies. When the first partner dies, a lump sum is paid out to the family. If the second policy holder dies, the coverage includes possible inheritance tax.
In terms of value, however, two single-life policies may offer better coverage compared to a joint policy. The price of two single policies is usually just equal to what you pay for in a joint policy but the payout is double when you choose the latter.
Use a broker if needed
When you have a pre-existing condition, it’s best to speak with a broker before buying a life insurance policy. Most insurance companies have different rules with regard to said conditions. If you have no idea where to look for the right policy for your needs, a reliable broker can help you assess your options thoroughly.
Choose guaranteed premiums
In addition to low start polices, you should also steer clear from policies which have reviewable premiums. At first, they may cost less which is a great attraction for many policy holders. The operative to note here, however, is reviewable. It means that your insurer may hike the premiums when they choose to. You may just as well end up paying more than what you bargained for in the first place. Choose premiums that are guaranteed to ensure that the amount you’re paying for won’t change over the years.