SimplyFinance - Life Insurance

5 Expensive Life Insurance Mistakes that Everyone Makes

2010-11-17T00:00:00Z

If you have dependents, you should really think about taking out a life insurance policy to protect them against the unexpected. Here are some common mistakes that people make with life insurance, and how to avoid falling into the traps.

1. Thinking that it's all about Price

We're not saying that bargain life insurance is a myth - if you fall into a lower-risk category, you can find a perfectly adequate life insurance policy from 5.00 - 10.00 GBP per month. Life insurance is often perceived as a luxury product, when in fact it is an extremely affordable type of cover. No, our point is simply that price should be just one of your considerations when buying life insurance.

The most important factor in your decision should be whether the level of cover you take out is sufficient to protect you and your family in case the worst should happen. Skimping on cover for the sake of a few pounds a month is a bit of a false economy, and your family will be the ones that suffer. Keep one eye on the price and the other firmly on the protection element.

2. Renewing without Shopping Around First

When your life insurance policy is up for renewal, this is a prime opportunity for improving on your existing deal. It may be that your circumstances have changed and that another provider is now a better fit for you, or it might simply be that you can get exactly the same cover from a different provider for less.

Either way, for the sake of a few hours of research, you can find out what your options are and make a more informed choice about how to continue your cover. Even if you do decide to stay with your existing insurer, knowing what else is available in the market means that you have a little more bargaining power and means that you may even be able to improve on your deal where you are.

3. Not speaking to a broker

One major insurance myth is that it is always better to go direct than to go through a broker. If you think about it, going direct to an insurer means that you have a limited range of products on offer. After all, an insurer is hardly going to direct you to a competitor because they have a more suitable product for you. By all means speak to insurers to find out what is available, but don't underestimate the value of an experienced broker.

If you use a broker that works with a number of different insurers, they will have a much wider range of life insurance products to offer you. Unless you yourself are an insurance broker (in which case you probably won't have made any of these mistakes), it can be helpful to speak to an expert about your requirements and financial circumstances. There are many different types of life insurance, and pinpointing the most suitable type of cover on your own can be tricky. Consider a consultation with a life insurance broker as part of your research process.

4. Leaving yourself Unprotected

So you have shopped around and found a better deal, congratulations! However you're not out of the woods just yet, there are still a few protection pitfalls you should watch out for. Many people will either swap policies before they have the new policy document fully ready, or will make the mistake of moving to a policy that doesn't offer them the same level of cover.

Firstly, only cancel your existing policy when you are fully covered with your new insurer. Life cover is designed to cover the unexpected, so once you have taken it out, you need to be insured at all times in order to keep your protection going. After all, neither insurer is going to jump at the idea of paying out when you are between policies. Secondly, don't change unless you are receiving equally comprehensive cover with the new policy (or even more). Make sure that you disclose any health issues that may have come to the fore since you took out your last policy, and check with your new insurer that any benefits you enjoyed before will still apply.

5. Not Reading the Small Print

If you find small print dull, you're not alone. In fact, small print is almost designed to be a little inaccessible and as boring as watching grass grow. Why? Because insurers will mention all the exclusions on your cover here, and they'd rather not draw your attention to these. But pour yourself a strong coffee and take the time to read all of the small print before taking out a life insurance policy. Life insurance is an important investment and finding out too late that you do not have enough cover could be devastating for your family. This goes for any insurance policy agreement, prop open those eyelids and get reading. You'll thank us.

Click here to request a callback from a life insurance specialist today.

How Long Could You Cope without an Income?

2010-03-04T00:00:00Z

If you are currently employed, or your partner generates the household income, it's worth giving some thought to how you would manage if the money dried up. Most of the time, this happens very suddenly and unexpectedly, either through redundancy, illness or the death of the 'breadwinner' in the household. Whatever else you are going through at this time, you need to ensure that you have sufficient funds to cover the living costs of you and your family.

Ask yourself the following question; if my income stopped today, how long would I be able to manage financially? Consider not only groceries and other day-to-day expenses, but also rent or mortgage bills, school fees and credit card repayments. If the answer is 'I'd be lucky to manage an entire month', the alarm bells should be ringing.

Research carried out by life insurer Friends Provident shows that you certainly wouldn't be alone if you've failed to make provisions for the loss of the breadwinner in your family. As many as 24 million people in the UK have absolutely no insurance in place to protect themselves and their families against loss of earnings. Of those that do have some degree of protection, many were found to be underinsured by an average of 14,500GBP per year or around 1,200GBP each month.

Of the people surveyed, a third thought that they could live on less than 35% of their take home pay in the event of losing their income, which in practice would be nigh on impossible to manage. The problem in many cases where people do have insurance is that they took this out at an earlier stage in their life and have not updated the policy as their circumstances changed. In a relatively short period of time, marriage, children and mortgage commitments can completely change your priorities, and it's essential to make sure that your dependents and your lifestyle are protected.

Ed Stuart-Brown, head of protection sales commenting on the Protection Oversight research (carried out for Friends Provident) said: "The findings in the Protection Oversight research are very worrying. Imagine being told that you had just been given a 66% cut in your income - the impact of that for most people would be catastrophic. It's time people took control of their future and looked at this in a responsible way, instead of burying their heads in the sand, especially in today's environment. Ignorance is not bliss, it's irresponsible."

So what should you do to ensure that you're properly covered? Firstly, if you have any existing policies, dig them out and have a read through them to see what level of cover you currently have. Make an appointment with your financial adviser and talk through your options based on your current income, the number of dependents you have, and the scale of your monthly financial commitments.

If you do not have an adviser, you can request a callback from an experienced insurance adviser by filling out our short life insurance form. This adviser will be able to give you quotes and advice, all of which will come with no obligations to proceed.

Before you make the call, you can also visit our Life Insurance pages to read more about the types of cover that are available or use our Life Insurance Needs calculator to estimate the level of cover that you should have.

Save Your Child from Taking on Your Debts

2010-06-10T23:00:00Z

New research from Aviva shows that over 36,000 people die leaving financial dependents each year, and that a shocking 56% of the UK's 5 million families do not have adequate protection. Insurers like Aviva are releasing products to encourage new parents to start thinking about life insurance, but there is still plenty to do to raise awareness of the problem.

Do you think you have enough life insurance to protect your family? Ask yourself these 4 crucial questions:

How much unsecured debt do I have?

If you owe money on credit cards or store cards, or if you have taken out a car loan or another type of unsecured personal loan, this all counts as unsecured debt. If you were to die unexpectedly, could your dependents continue meeting these repayments?

As you don't have a property or other valuable asset secured against the debt, your dependents would not lose the house if they couldn't meet repayments. However, several missed repayments would result in a damaged credit rating, and failing to repay the debt for a longer period could lead to legal action. Do you want to put your family in that situation?

How many years of school do my children have left?

Even when children are in State education, as a parent you know how expensive it can be to buy uniforms and school supplies, and pay for school trips and extra-curricular activities. If the main earner in your family were no longer around, could your children afford to continue their education? Might they want to stay on for higher and even further education? It's important to consider your child's future when deciding how much life insurance you need.

How many years of my mortgage do I have left to pay?

If you have taken out a mortgage, you are legally bound to make regular repayments on the property. If you were to die unexpectedly with no life cover, you'd be effectively handing all that debt to your family and leaving them with no way of meeting those payments. A few missed payments can damage a credit rating, but continually failing to meet mortgage payments can lead to your family being evicted and their home repossessed. A decreasing term policy is a cost-effective way of ensuring that the mortgage payments are covered, if the mortgage is your major concern.

Am I the main earner in my family?

If you contribute all or a major part of the household income, it is your responsibility to ensure that your family is protected in the event of your death. Of course it's a subject that nobody wants to think about. However, by taking the time to speak to a life insurance adviser, you can carry on with your life with the peace of mind of knowing that you have protected your family and your home against the unexpected.

Click here to request a callback from a life insurance adviser today.

No Life Insurance

2010-05-19T23:00:00Z

Having no life insurance is extremely risky if you have a partner or family who depend on you financially. The reason is that if you were to die unexpectedly, they would become legally responsible for paying your debts and funeral expenses, as well as having to manage the day-to-day living expenses without the support of your income.

Nobody wants to think about death, but it's an unfortunate fact that millions die before they have had the chance to get their affairs in order and properly provide for their families. This can be devastating for the families that are left behind, since they have to deal not only with losing a loved one but also with serious financial commitments.

--->> Click here to get a life insurance quote today! <<----

Having no life insurance is of course not an issue if you have no dependents and no debts, and also have enough savings to cover funeral expenses. However, in reality very few people are in this position. Debts cover everything from outstanding balances on a credit card to mortgages, from overdrafts to car loans and hire purchase on furniture, and these are not financial commitments that you would reasonably expect someone else to have to take on.

A life insurance policy is an agreement with an insurer that if you were to die within a certain time period, your family would receive a lump sum of cash that would enable them to manage financially without you. There are two main types of life insurance policy. One type, known as 'term insurance', will only cover you for a set number of years. If you die outside this period, even by a matter of month, you would not be covered. This added risk makes term life insurance the cheapest type of life insurance.

The other type of life insurance is known as 'whole of life insurance'. As you'd expect from the name, this type of policy will cover you no matter when you die. This makes it a more expensive type of insurance, but as you pay premiums over a number of years, the policy builds up a value that can be cashed in if you choose to cancel the policy (known as the 'surrender value).

The best way of finding the right life insurance policy for your needs is by speaking to an insurance adviser. It might be for example that you only need a policy to cover you until you have paid off your mortgage, or until your children have completed their education. An adviser will be able to find you the right policy for your circumstances. Don't delay any longer, as the worst thing you can do for a family that depends on you financially is to spend another day with no life insurance.

--->> Click here to get a life insurance quote today! <<----

When You need Insurance...And When You Don't

2010-04-08T23:00:00Z

Although insurance is incredibly important in some circumstances, it is an unnecessary expense in others. Make sure that you are only paying for cover that you actually need, and if it's not required, put the money into savings or mortgage overpayments instead!

Below are some of the reasons you may or may not need cover, but if you are unsure, always take professional advice from an impartial adviser, because this is the only way you'll find the best solution for your personal circumstances.

You need life insurance when...

You have a family: It's not something any of us like to think about, but if you have a family and anything happened to you, the financial consequences could be devastating for your partner and children, especially if you are the main breadwinner. A life insurance policy would ensure that your family would receive a lump sum if the worse were to happen, so school or university fees could still be paid, and the mortgage and other essential expenses could still be met.

Use our life insurance needs calculator to work out how much cover you need, or fill out our short life insurance form to get a no obligation life insurance quote from an independent insurance adviser.

You don't need life insurance when...

You have no dependents or debts: If you're not in a position where you are supporting anyone else financially and you are not in debt, there is no need to take out a life insurance policy. Your next of kin would be responsible for paying off any debts after your death (including your mortgage), and also paying for your funeral, but if you do not have any debts that would be passed on and have savings or funeral insurance that would cover these outgoings, it's likely that you don't need life insurance.

If your mortgage is the only expense that you would be leaving behind, you can take out a specific type of over known as mortgage life insurance, and this would payout enough to cover your remaining payments if you were to die before the home loan is paid off. Because the potential payout decreases over time, the policy costs for this type of insurance are lower, making this a more affordable type of life cover for those with limited debts.

Your company pays for your insurance: If your employer provides life cover as a part of your benefits package, it doesn't make sense to pay this money twice. However, if for any reason this policy is due to end, make sure you have another in place before the cover ends. You're not covered by either your old or your new provider if you are in between policies.

You need Protection Insurance when...

You have significant outgoings each month and no savings: If you got ill, lost your job or for any other reason could not work for a long period of time, could you support yourself? How about your family? If the answer is no, you should consider a type of protection known as ASU (Accident, Sickness or Unemployment) to protect against these possibilities.

There are various types of ASU cover - mortgage protection insurance which (as the name suggests!) protects your mortgage payments if you unexpectedly lost your job, loan payment protection (to protect your repayments on a loan) and income protection insurance. This last will provide you with an equivalent income for up to 2 years if you were to lose your job or become unable to work.

You don't need Protection Insurance when...

You have limited outgoings each month and you have enough savings to cover you for 3-6 months if you suddenly lost your income. If you don't have a mortgage or dependents who would suffer financially if you lost your job, or if you have savings to cover you for a reasonable period, there's no need for this type of insurance.

Give Up Smoking and Save up to 43% on Your Life Insurance

2010-03-11T00:00:00Z

If you're a smoker and have been inspired to quit following the national No Smoking Day on Wednesday, you could see significant financial benefits from kicking the habit in addition to the improvements to your health.

However, cleaner lungs and a healthier lifestyle are only two of the positive physical changes you'll notice. If you have life insurance protection to protect your family, you may also be surprised to learn how much difference being a non-smoker makes to your premium costs once you have been smoke-free for 12 months.

Katie Jenkins, Site Editor at SimplyFinance commented, "People should be aware that quitting smoking has a really positive effect on all areas of their finances. The most immediate consequence is being better off each month to the tune of several hundred pounds; money that can be put into a savings account, used for paying off debts or to treat the family."

"However in the longer-term, if you hold a life insurance policy, you could be saving on your monthly premium payments too from 12 months after kicking the habit. This can add up to thousands over the term of your policy. " Male and female non smokers would save 43%* on their premiums when compared to those paid by smokers. The premium for a non smoking male falls to 14.31 GBP from 25.45 GBP for a smoker, and a female 11.30 GBP rather than 20.40 GBP.

While applicants must not have used tobacco or nicotine replacement products for 12 months to qualify as a non smoker, existing policyholders could start saving straight away. "Many policyholders will not be aware how far the cost of life assurance has fallen in recent years, so even if they don't yet qualify as a non smoker, they could still make substantial savings" said Richard Morea of London&Country.

If you'd like to talk through your life insurance options with an experienced adviser, simply fill out our short life insurance form and we will connect you with an adviser from the SimplyFinance network.

To find out more about the free advice and support that is available to help you quit smoking, visit the No Smoking Day website or apply for a free NHS Quit Kit. For more information about the types of Life Insurance available to you, please visit the SimplyFinance Life Insurance pages.

*Based on a 35-year old taking 200,000 GBP level term assurance over 25 years.

Critical Illness and Life Cover

2010-05-19T23:00:00Z

Critical illness and life cover go hand in hand when you are looking for a way of ensuring that your loved ones are financially protected against any eventuality. Dealing with a critical illness is extremely difficult both for the sufferer and for their family, but including critical illness cover on your life insurance policy at least means that as a family you would not also have to bear a huge financial burden due to losing an income and having to pay for treatment.

If you do not feel that you also need to take out life cover, critical illness cover can be taken out as a standalone policy. However when people do opt to take it out in addition to a life insurance policy, the most common combination is to have a critical illness add-on to a decreasing term life insurance policy. This is often because people wish to guard against becoming unable to work due to illness while they are still paying off a mortgage or another large debt, or while their children are still in full-time education.

Do bear in mind that critical illness and life cover is not the same thing as income protection insurance. You can start claiming on an income protection insurance policy (also known as ASU, or Accident, Sickness and Unemployment insurance) once you have been unable to work for a set period of time, say six months. This insurance will then pay you a monthly income equivalent to that which you received in full-time work, and will pay out for a limited period of time (that you specify when you take out the policy). Critical illness cover is a lump sum payout for specific illnesses, and you can receive this as soon as you are diagnosed.

So what does a combination of critical illness and life cover offer you? This type of policy would usually pay out a tax-free lump sum either if you died or you were diagnosed with a critical illness that is named within the policy. It's important that when you are looking to take out this type of policy you read through the policy documents to make sure that you are aware of which illnesses are covered. Being diagnosed with an illness is not the time to find out that your insurer will not cover you for it.

Whereas critical illness and life cover is a useful combination for someone with a family, if you're single and have no dependents, you may find that critical illness cover on its own is a better option for you. This is because you could then afford to pay off any outstanding debts such as your mortgage balance if you were diagnosed with a critical illness. The best thing is to talk through your options with an experienced life insurance adviser. They will have access to many policies across the market, and will be able to direct you to a suitable policy, be that a critical illness policy, life insurance or critical illness and life cover.

Click here to request a callback from a life insurance adviser today.

5 Reasons to Get Life Insurance

2010-05-26T23:00:00Z

1. You'll protect your family in the event of your death

If you're the main earner in your household it's your responsibility to ensure that if you were to die unexpectedly, your family would be taken care of. Funeral expenses alone can amount to thousands of pounds, and with no money coming in, your family would have to meet this cost as well as countless others - all at a very difficult time.

2. You'll guarantee an income for your dependents

A life insurance policy guarantees a lump sum payout on the event of your death, which means that you are providing an income for your partner and children. There are different types of life insurance policy, some of which will provide cover regardless of when you die and others where you must specify the time period over which you want cover. You can maximise the income your dependents receive by putting a life insurance policy 'in trust'. This means that the payout is made to your beneficiaries directly, not to your legal Estate, and therefore it is not liable for Inheritance Tax.

3. Your children will be able to complete their education

Whether or not your child is privately educated, there are substantial costs that you will incur over while they are at school. From uniforms to school trips, the costs mount up quickly, and if you were to die unexpectedly with no life insurance it's likely that there would be a struggle to maintain their education. Consider also the costs involved in sending your child to university if they choose to go into further education. These costs are only going to increase, and your life insurance policy could be the difference between getting a degree or having to go straight into work.

4. The house and other assets will be safe

If you're one of thousands of UK homeowners with a mortgage, you'll be aware of the risks involved in missing mortgage payments. In the short term, your credit rating takes a nosedive, making it harder to get accepted for further credit in the future. Being unable to meet your mortgage payments in the longer term however can lead to repossession. If you contribute part or all of the mortgage payments each month out of your income, you need to have life insurance to ensure that your family is still able to meet these payments if you were to die.

5. Your debts will not pass to your family members

Think of all the money that you owe on credit cards, hire purchase, car loans and the many other financial obligations that build up over a lifetime. If you were to die with no life insurance, you are effectively passing on your debts to your partner and children, but not leaving them with the means with which to pay them. Debt collection agencies can employ quite aggressive tactics to recover debts, and there is the danger of legal action and repossession if debts remain unpaid over a long period of time. The lump sum payout from a life insurance policy would enable your dependents to pay off your outstanding debts. You therefore have the peace of mind of knowing that you would not be leaving your loved ones with a legacy of debt.

Fill out our short form to request a free quote from a life insurance adviser today.

How much should I insure my life for?

2009-05-10T23:00:00Z

'How much should I insure my life for' is a question that many of us will consider when looking at our future financial planning. Life insurance can be a sensitive subject, and it's important that if you are considering taking out a policy, you think carefully about why you are doing so and assess the financial priorities in the event of your death.

Everyone's circumstances are unique, and there isn't one policy that will meet every individual's needs. What to prioritise can be a difficult decision, you may simply be worried about the cost of your funeral for those you leave behind, or your concerns may stretch to financial stability for your partner and children years into the future. Therefore the importance of understanding the amount you should insure your life for cannot really be understated. An inadequate or unsuitable policy can actually even cause difficulty after your death, as opposed to helping those who are left behind.

How much life cover do I need?

The first step is to try and make a list of the financial hurdles that may face a loved one in the event that you die prematurely. Many people want to simply have sufficient life insurance that they can leave enough to cover the mortgage - often the biggest debt facing a household. In this case it could be worthwhile making sure any sum covers not just what's outstanding but possibly also any fee that might be incurred for settling the mortgage debt a little early (the ?early redemption penalty?).

The question 'How much should I insure my life for?' is an extremely difficult one, because you have to actually plan according to a long-term future that, of course, you cannot predict. If you've got children, you may want to consider whether they'll want to go to university, for example. Other considerations include paying off a car loan or other secured or unsecured debt.

The amount of life cover you want - that is, the amount of money the insurance company would pay out should you die - can be related to your age and the number and age of your dependants. The amount (or 'sum insured') may also be influenced by any benefits an employer might be providing, so you need to balance your employee life insurance and pension scheme (if you participate in one) against your personal life cover requirements. Remember as you grow older and your circumstances alter, your life insurance may need to change as well.

When you insure your life you'll often be asked to choose between various types of cover.

* Level term life assurance lets you decide how long the cover runs for and at what level the policy operates. Should you die during the policy term, the insurer would pay the amount you are covered for.

* For those who are most worried about an unpaid home loan after they are gone, Mortgage Protection life insurance is an option, which involves simply naming an amount you would like to be paid out, but this type of cover actually reduces in value each month in line with your shrinking mortgage as you pay it off. Then if you die during the policy's term, the insurance company simply pays the calculated amount of cover.

* Critical illness cover can be selected with a level or a decreasing term life assurance policy. Again you can name the amount, but a payout is also forthcoming if you're diagnosed with a critical illness during the policy term, as opposed to simply dying during the policy term. Typical types of illness covered include strokes, cancer, and heart attacks, although you should check with the insurer on the exact list before proceeding with the policy.

Use our Life Insurance needs calculator to help you choose your level of cover, or get a no-obligation quote from an experienced life insurance adviser by filling out our short life insurance form.

Types of Life Insurance

2008-05-23T23:00:00Z

Life insurance is a contract between the policy owner and the insurer, in which the insurer agrees to pay an amount of money in the event of the owner's death. The owner pays premiums, at agreed upon intervals, in exchange for this insurance.

The policy owner assigns a beneficiary to the policy, who is the person to receive the benefits upon the owner's death. There are different types of life insurance, including permanent, term, and variable policies. These are each designed with different needs in mind. You may be interested in estate planning, temporary protection, cash accumulation, or just the peace of mind of knowing that your loved ones will be taken care of in the event of your death.

Permanent life insurance is for the life of the insured. It accrues cash over the length of your life, as long as you continue paying the premiums. These premiums are higher than for term life insurance, because they must pay out, but these products accumulate a cash value against which the policyholder can borrow and which will be paid to the beneficiary upon the owner's death.

It is possible for this life insurance to be paid out early in the event of a critical illness, as long as the contract is not broken. Another advantage to permanent life insurance, rather than beginning with term insurance and switching over later in life to a permanent policy, is that you will not have to consider being rejected if you develop a serious illness before the change in policies, which could affect your acceptance.

Term life insurance gives you coverage for a set amount of time (usually in multiples of 5 years), but the value of the policy is only paid out if death occurs during the time specified. In addition, the policy's value does not increase. Because term life insurance policies are a pure death benefit, they are generally 8 to 10 times less expensive than a permanent life policy for the same coverage.

Variable Universal life insurance, usually between the price of permanent and term, combines a term life insurance policy with variable investment options. The policy owner decides in which accounts to invest, which is an attractive feature. There is more financial risk with this type of policy due to markets; however, there is the potential for greater returns at the end of the term. This type of policy also requires more attention to planning.

Because you want to take care of your family even after you are gone, life insurance is extremely important. You will be able to plan your life through retirement and then financially protect your family once you have passed.