When insurance could make all the difference
Life insurance is relatively cheap for most people but can make a huge impact on the lives of loved ones we leave behind. And, unlike almost all other types of insurance, premiums on life cover are falling as life expectancy increases at a rapid rate. For instance, a 35-year-old male non-smoker can get £100,000 worth of cover on a 20 year level term policy starting at around £10 per month. Yet many people – married and single – choose to go without this most basic of insurance policies.
The main time life insurance – also known as assurance – is bought is at the same time as a house purchase. The extra financial responsibility that a mortgage brings tends to focus the minds of borrowers on what would happen if they – or their partner – died. People in full-time employment are perhaps the most obvious group who need a policy. Without your income, your family may be unable to support themselves or could be hit with unmanageable debts. In a worse-case scenario, they may be unable to cover mortgage costs and be forced to leave the family home.
In the longer term, a payout from life insurance could help provide for your children's future and cover costs such as university fees.
Even if you're not the main breadwinner, your family may struggle to cope financially should something happen to you. For instance, AXA insurance puts the value of a stay-at-home parent at £23,000 per year.
Types of cover
Policies can run for the whole of life or for a set term, such as 20 or 25 years. Level-term insurance pays the same whenever you claim. A decreasing term policy sees the benefit reduce over the course of the policy and the premiums are slightly lower than with a level-term arrangement. Decreasing term is popularly sold alongside mortgages as the idea is that as you pay down the amount owed on the home loan the money you need the insurance to pay out also reduces.
Do I need cover?
Even if you have life insurance, it's important to re-evaluate your level of cover in the event of any major life changes. For example you may need different protection if you take out a joint policy with your spouse and the relationship ends.
A new job or even a promotion could also be justification to re-examine your policy. A higher salary will almost certainly equate to an improved quality of life and therefore a more difficult readjustment without your income.
How much do I need?
Ideally, the payout should free your dependents from the burden of current debts and if possible, provide enough to maintain their lifestyle.
When buying a policy, it's important you plan ahead. Life insurance can be set up with a longer term than usual in many other types of insurance, so it's important that a policy is able to meet your needs today and in the future.
If your main priority is to cover existing debts such as your mortgage, taking out a policy for your total debt should be sufficient. However, if you want to ensure your family is comfortable financially there are a number of things to consider.
* How much would your family income drop?
* What are the family expenses and how much would they change?
* How far will your savings go?
* How much cover do you receive from your employer or company pension?
* Are there any state benefits that provide extra support for your family's needs?
If you feel that you can't afford the premiums on providing large sums of cover then look at your family's priorities. Even £50,000 may be enough cover for them to be able to ride out the financial storms that could follow your death, giving them vital time to sort out their financial future.
Top tips for buying life cover
By setting up your policy in a trust you could avoid paying inheritance tax – which could be as high as 40 per cent.
* Don't forget to investigate any death-in-service benefits offered by your employer; this may reduce the amount of life insurance cover that you need.
* If you are a smoker, giving up will reduce the cost of your premiums; however, don't lie as insurers may investigate and this could lead to a payout being invalid.
* Shop around for the best price and cover; your mortgage provider or bank will be only one provider amongst dozens that you can try.
Justin Bieber was one of the hardest hit
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Shock poll shows voters believe Ukip is to the left of the Tories
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Ukip candidate jokes about 'shooting peasants' in racist and homophobic rant
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
Sony hack: Angelina Jolie branded 'seriously out of her mind' in further embarrassing leaked email saga
iJobs Money & Business
Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
£32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...
£Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...
Day In a Page
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens