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How Can I Pay Less for Life Insurance?

How Can I Pay Less for Life Insurance? All Life Information Information Explained.

        

In the event of your death your loved ones will be left to cope without you, having a Life Insurance policy will ensure your dependents have one less thing to cope with. This article will help explain what you need to know in order to make the right choice to provide security for your family if the worst were to happen.

What is life insurance?

The term Life Insurance is used to describe a type of insurance policy, which is designed to pay an agreed lump sum to a beneficiary selected by you in the case of your death, diagnosis of a terminal illness or in some cases a pre-arranged date.

Life assurance or term insurance are also frequently used terms for this type of insurance product, Life Insurance is available in several different formats, they can vary in the amount you are insured by, the way in which the policy will pay out and the way in which you have to pay for your policy.

Put simply there are two basic types of Life Insurance products, the first is referred to term assurance. Term assurance is a Life Insuranceproduct which will provide a pay out should you die during a pre-arranged period of time, for example 25 years. If you die after this period has elapsed, there is not pay out. With this in mind, term assurance is commonly sold alongside mortgage products; this is to ensure your family would not loose their home in the event of your death.

Even amongst term assurance there are a variety of different options to choose from. Level term assurance pays out one lump sum of a pre-agreed amount at any time during the duration of the policy. It is common for this type of Life Insurance to be sold alongside an interest only mortgage.

Decreasing term assurance is similar to level term assurance in the fact that it pays a lump sum to your selected beneficiary, however that is where the similarities end. With this type of Life Insurancethe value of the lump sum slowly decreases by an agreed amount on an annual basis, until finally by the end of the policy's term the value is zero. This type of Life Insurance is commonly sold in conjunction with repayment mortgages, since the amount left to pay on your mortgage will also have decreased as each year goes on. In contrast increasing term assurance pays out a lump sum, which increases by a small value each year. Over a long period of time this kind of product is a good way to protect yourself from the effects of inflation.

Two other less common forms of term assurance are convertible term assurance and family income benefit insurance; convertible term assurance enable you to switch to a different kind of life insurance product at any point during the term of the policy, for example if you started with a decreasing term assurance policy you could choose to change to an increasing term assurance. Family income benefit insurance is vastly different as no lump sum is paid, instead a regularly income will be paid from the time of your death to the end of the policy.

Whole of Life policies are pretty self explanatory and offer cover that extends over the entirety of your lifespan, advantages of this type of policy include, considerably higher pay outs, disadvantages include, substantially more expensive premiums. Whole of life policies can either be funded through monthly premiums or through investments, if you choose to pay monthly premiums you will have a fixed final payout, whilst those tied to investments will pay out based on the performance of the investment.

How do I go about choosing the right product?

Your lifestyle and circumstances will very much determine what type of Life Insurance is right for you, factors such your income, how many dependents you have and whether you have a mortgage or other significant financial commitment will all influence your decision. In addition how much you can afford to pay each month in premiums should also high up on your list of considerations. Other factors to consider should be, the type of policy you want, whether there are any administration costs, are there any risks involved; this is particularly relevant for policies linked to investments, flexibility of the policy; should your circumstances change and the terms and conditions of the policy.

What should I do once I've chosen my policy?

Once you have selected the policy that best suits your requirements your next step should be to ensure the Life Insurance company providing your policy is registered with the Financial Conduct Authority, this is essential, as if you need to make a complaint about your provider your are able to do so through the correct channels.

Once you have checked this you will then need to complete the application process as required by your chosen provider. It is imperative that you are honest about your circumstances, as this will affect your premiums and, more importantly, giving false information might lead to the insurance refusing to pay out when the time comes. Be truthful about you age, gender, smoking status and your medial history; especially if you have any pre-existing medical conditions. Some insurers will require that you undertake a medical examination before taking to a policy, but this is becoming less common.

How can I find cheap life insurance?

The best advice to take when looking at Life Insurance is to shop around! The easiest way to do this to compare a number of different policies and quotes using an online comparison site, this is crucial before you commit to anything. Another good idea is not make a list of what your priorities are, if price is a big factor for you it may be wise that term assurance policies usually work out cheaper than whole-of-life cover as you are only cover for a set period.

It is also worth remembering that there are changes you can make in your lifestyle to reduce the cost of Life Insurance, for instance given up smoker could half the premiums you are asked to pay.

        


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