At these prices, life is cheap

Death may be unpalatable, but for relatives, penury can make the loss much worse.

Wasn't it shocking that the Grand National was delayed? Do you think Manchester United will win the championship again? Who will win the election? Have you seen the comet? We'll think about anything rather than consider our own mortality. But if a tragedy did happen to you, you would not be the only one to suffer. How would your family cope, not just emotionally, but financially? Unless you have taken steps to protect them, your loss could prove to be just the beginning of their troubles.

Life cover is a way to ensure that your family would be able to cope financially if - excuse me for mentioning it again - you were to die. Anyone with responsibilities knows the importance of life assurance, but around of third of British adults have no cover at all.

But, as our table shows, it costs from just a few pounds a month to set up a simple policy which will pay cash to your dependents if you die. Our figures are based on cover for pounds 50,000 but most people will want to get more cover than that.

Why? If you are the breadwinner, or one of them, you should see life assurance as a way of ensuring your loss doesn't hit your family's finances. The aim should be to replace your income, or to provide enough income to meet their future needs. The simplest and cheapest life policy is term assurance which you pay into for a certain period, and which pays out if you die within that period.

The policies pay out a lump sum on death so you need to ensure that the amount is enough to generate an adequate income for your family. For instance, if you earn pounds 30,000 a year, you should aim to have life cover of pounds 600,000. Why so high? To guarantee an annual income of around pounds 30,000 from your life assurance payout, based on the assumption that you should be able to get a 5 per cent return on your investment. If you think in the future your dependents may be able to get a 10 per cent return on an investment, then you would need to buy only pounds 300,000-worth of life cover to get a pounds 30,000 income.

Do the sums based on your own salary. Of course you may feel that your family may not need as much as you earn, particularly if some of their outgoings may be reduced on your death. You may have mortgage replacement insurance, for instance. If so you should work out their future outgoings and work out your life assurance needs accordingly.

Alternatively you could list your debts first, including the mortgage, and start by getting enough life assurance to cover them, leaving your family with a financial clean slate. Remember to include all loans or other credit debts you may have if you follow this approach. Then you should consider just how much your family would need to live on in a debtless environment and working out your life assurance needs accordingly. If both partners work then both should be covered to an appropriate level, as the loss of either income could lead to a financial strain.

The costs of assurance will depend on a number of issues. Your age, of course, will be a determining factor, as will your sex. Since females are statistically likely to live longer than men their life cover is cheaper.

You health will play a big part in determining the cost of cover but as long as you are reasonably healthy, you shouldn't need to undergo a medical to get life cover, unless the insurance company demands it because of your age.

However they will not take it on trust and you will need to supply a note from your doctor attesting to your general condition. As you can see from the table, costs vary considerably between insurers with, in some cases, cover costing as much as three times more. This means that it is sensible to shop around - but it is equally important to check the small print. Some polices may have exclusions or omissions which concern you. Exclusions could be anything which render the policy invalid and it is important to understand what they are. Omissions could be inadequate cover - for instance, some more expensive policies pay out immediately if you are diagnosed with a terminal illness and have less than 12 months to live.

Getting the right cover is important so you should make sure you understand what is being offered. You may want to take expert advice to ensure you do not make a mistaken

Life cover - what it costs

Lowest and highest monthly premiums for pounds 50,000 of level term assurance for a non-smoker. Lowest rates in all cases were from Equitable Life; Highest rates quoted came from various providers as shown

Low High

10-year term

Male aged 30 pounds 3.75 (Equitable ) pounds 12.00 (Winterthur)

Female aged 30 pounds 2.67 (Equitable) pounds 11.00 (Ecclesiastical)

Male aged 40 pounds 6.65 (Equitable) pounds 20.00 (Ecclesiastical)

Female aged 40 pounds 5.33 (Equitable) pounds 16.00 (Ecclesiastical)

Male aged 50 pounds 16.75 (Equitable) pounds 39.50 (NM Life)

Female aged 50 pounds 12.03 (Equitable) pounds 37.50 (Scot.Friendly)

15-year term

Male aged 30 pounds 4.16 (Equitable) pounds 12.50 (Winterthur)

Female aged 30 pounds 3.11 (Equitable) pounds 11.00 (Ecclesiastical)

Male aged 40 pounds 8.42 (Equitable) pounds 22.00 (Ecclesiastical)

Female aged 40 pounds 6.35 (Equitable) pounds 17.50 (Ecclesiastical)

Male aged 50 pounds 21.94 (Equitable) pounds 46.50 (Winterthur)

Female aged 50 pounds 14.80 (Equitable) pounds 40.00 (Utd. Friendly)

20-year term

Male aged 30 pounds 4.91 (Equitable) pounds 13.50 (AXA E&L)

Female aged 30 pounds 3.62 (Equitable) pounds 13.50 (Utd. Friendly)

Male aged 40 pounds 10.56 (Equitable) pounds 26.00 (NM Life)

Female aged 40 pounds 7.64 (Equitable) pounds 24.00 (Utd. Friendly)

Male aged 50 pounds 27.94 (Equitable) pounds 60.00 (NM Life)

Female aged 50 pounds 18.36 (Equitable) pounds 56.50 (Scot. Friendly)

Source: Moneyfacts

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