Life Insurance provides financial protection to your family in the event of your death. There are 3 main types available in the UK - Term Insurance, Whole Life Insurance and Endowment Policies. Some cater for specific situations, for example to cover an outstanding mortgage, to pay regular income for a fixed period or simply to pay out a lump sum upon death. Others are also a means of saving, combining life insurance with investment to help make your money grow over time. Whatever your need, you should consider a life insurance policy as a long-term commitment.
In the UK there are numerous companies providing Life Insurance. They have similar products but cost, investment performance and the small print in the policies can be significantly different. You should consider the strength and financial reputation of your insurance providers as you are relying on them to provide the financial security for your dependants.
Premiums can vary greatly between providers depending on the risk they consider you to be. Factors such as your age, length of the cover, your and your family's health history, occupation and lifestyle can determine your premiums. The market is very competitive so it pays to obtain several quotes.
Points to Watch: Life insurance policies are a long-term commitment. When choosing the product for you, consider the following:
If my personal circumstances change, am I able to alter the sum insured and the premiums?
Am I able to switch from one type of policy to another? If so, at which point? Will a medical be required?
Am I able to stop my premiums and surrender or cancel my policy without added penalty?
Should I allow for inflation in the policy or simply insure for a level amount?
Should I be purchasing a Savings Related Life Policy or a separate Life Policy and Investment product?
Are the benefits payable upon death or maturity of the policy free of Inheritance and Income Tax? For example, you may consider writing the policy in trust for your dependants so that it falls outside of your estate for Inheritance Tax purposes. For Income Tax relief, you make wish to check if the policy is a "qualifying policy". Tax is a specialised topic, so you may wish to seek professional advice.
