Life Rates

07-Sep-2010

Finding the best life rates can be a tricky business.  The reason for this is that life insurance is not the type of financial product where you can compare like with like and simply go for the cheapest option out of a number of similar products.  Life insurance is a personalised insurance product, and therefore the life rates that you find should reflect both your current circumstances (finances, outstanding debt, dependents and lifestyle) and the type of cover that you want in order to protect your family against the unexpected.

Firstly, you should know which type of cover you are looking for.  At a basic level, there are two types of cover: term and whole of life.  Term life insurance will cover you for an agreed-upon period of time only, and will pay out a lump sum of cash to the person or people you specify (the 'beneficiary' or 'beneficiaries') if you should die within that time period.  If however you died after that period is over, you would not be covered.  

Whole of life cover would pay out a lump sum to your beneficiaries regardless of when you die, and this is obviously a more expensive type of cover.  This is where your lifestyle becomes a factor - if you lead a healthy, active lifestyle, and you do not drink to excess or smoke, it's statistically likely that you will live for longer.  Therefore, you have more years of paying your life insurance premium before your insurer would have to pay out to your family, and your life rates are likely to be cheaper.  If there were a high possibility of you dying within 2 years of taking out a million pound life insurance policy, your life rates would be considerably higher.

It's also important to consider why you are taking out a life insurance policy.  If you need it to ensure that your dependents are not left with the mortgage to pay off in the event of your death, then a decreasing term life insurance policy may be the most sensible option for you.  As the name would suggest, a decreasing term policy offers a diminishing level of cover as you pay off your mortgage loan.  If you were to die before the mortgage had been fully paid off, the insurer would pay out a lump sum that would clear the mortgage balance.  The life rates remain constant throughout because your insurer will factor in the term of the policy when you take it out, but life rates for this type of policy are likely to be among the most affordable.  

As you can see, there are a variety of different factors to consider when you are shopping around for the best life rates in the market.  In addition to the above, you also have to think about whether you want a single life policy or a joint policy for yourself and your partner.  You should also consider the inheritance tax implications of including a life insurance policy within your estate.  To find the most reasonable life rates for your circumstances, request a callback from a life insurance specialist today and talk through your options.