We’ve all, undoubtedly, thought about how loved ones may cope financially if you died, but few of us have actually done anything to help protect them should this happen.
Life insurance is great if you want to financially help your loved ones should the worse happen and knowing you have provided them with a financial safety net can provide will give you peace of mind.
You can start a policy from as little as £5 a month and it could be worth it if you have dependents that would benefit from such a payout, especially if you have income that they rely on.
Types of life insurance
There are basically two types:
- Term life insurance – It will normally pay out a set amount lump sum if you die within a fixed term – such as 5, 10, or 25 years. A lump is paid only when you die
- Whole-of-life policy – this policy will pay out regardless of when you die, as long as you keep up with your premium payments
Prices for women
Prices on life insurance for women went up for women in December 2012 – you can thank the EU courts for the price hike, which ruled that gender could not be taken into account when calculating insurance costs.
So both men and women can now expect to to pay the same price for any kind of insurance.
What you should know
If you are considering taking out life insurance, then it’s worth knowing the following:
- Ask your insurer what protection there is if their company goes bust
- Ask for the lump sum payment upon death to be paid into a trust – writing the policy in trust means the lump sum will not form part of your estate and therefore will not be subject to inheritance tax. You can do this easily as many insurance companies will give you that option. Trusts can be difficult to cancel, so be sure of the details
- Tell your insurer about all illnesses – past and present
- The healthier you are, the cheaper it is. Smokers may pay more.
How to get one
You should shop around for life insurance policies, just as you would for your home or car insurance.
You can get quotes from comparison sites, going direct to insurers, brokers or financial advisers.