There are few more important things in life than providing for your nearest and dearest.
Usually this means while you’re alive and kicking rather than six feet under, however none of us really know what life’s got in store for us in the long run, and fate can very rarely be cheated when the Grim Reaper comes calling.
So it’s imperative that we do what we can, while we still can. And this means ensuring that there’s plenty in the kitty for those who depend on you in the event of your untimely demise.
Which brings us to the slightly dark subject of life insurance. But there’s no point in burying our heads in the sand and hoping it will go away as, like taxes, death is seemingly inescapable as eternal life has yet to be invented as we pen this.
Assuming that it hasn’t – and that we’re all mere mortals hoping to continue providing for those around us long after we’ve said our goodbyes – it would be useful to determine just how to keep tabs, fine tune and ultimately safeguard the life insurance policies we have hitherto arranged; or conversely, be aware of the spectrum of options available to those looking to complete the dastardly deed and arrange the best life insurance policy for them.
Either way, there are a list of generally-accepted dos and don’ts when it comes to life insurance, which is precisely why we’ve compiled this summarised hit-list to give everyone a fighting chance from the get-go.
DO:
Your homework. Before you even think about entering into any binding agreement with a life insurance provider, know and understand the amount that you require as well as the type of cover you’re looking for. Doing the math and researching what’s what before approaching a life insurance agent or broker will protect against being talked into a life insurance policy that doesn’t cater to you and your loved one’s needs.
Shop around. This is where Bob can help. We work with lots of leading life insurance companies to help you find a great deal that matches your exact needs and requirements.
Review your existing cover periodically. There are times in life when for a multitude of reasons you may need to alter your original arrangement, either increasing or decreasing your policy features as your lifestyle needs modulate. Typically life’s many variables such as change of occupation, increase in debts as well as circle of life scenarios like marriage, divorce, birth or death of a family member or other changes in personal circumstances will prompt necessary amendments to your existing life insurance agreement.
Inform your life insurer if you quit smoking. Seriously. If you finally kick the nicotine habit then you may well be liable to get reduced premiums for your life insurance coverage. It’s not unheard of for some ex-smokers to slash 50% on the cost of their existing policies when they re-negotiate their deal.
Cover your main debts. It’s crucial that you take into account ALL your outstanding financial agreements and address total repayment amounts when drawing up a life insurance plan, ensuring that you cover every outgoing from mortgages and loans to credit cards and catalogues.
Place your life insurance policy in trust. A biggie this, as by attending to this relatively simple and straight forward deed your dependents will successfully side-step any inheritance tax bills demanded after pay-outs made on your life insurance policy. A free service provided by your life insurance company, which can be instructed merely by completing a few forms which your policy-purveyor can guide you through at the time.
Take the plunge. Especially when you witness a great life insurance deal, and the sooner the better as age, unsurprisingly goes against you with life insurance policies. The younger you are when you sign up to one, the more competitively priced the policies tend to be. What with the reduced risk being the main precursor to that.
DON’T:
Arrange your life insurance with your mortgage lender. General rule of thumb is that mortgage lenders tend to offer over-inflated prices when it comes to life insurance. People tend to panic, especially when they discover that – if they’re the main breadwinners for dependants – then they need to arrange a life insurance policy before the mortgage can be agreed to and go with their mortgage lender. Big mistake. Take your time, shop around and always keep your life insurance policy separate to your mortgage in terms of lender.
Forget to look to the future. The foreseeable future anyway, and the very real prospect of your children’s school fees and university fees being taken care of should you slip this mortal coil at an inconvenient juncture. Bear in mind home improvement costs at a later date too. These are critical factors to consider when thrashing out how much life insurance you need. Having said that, don’t overestimate potential future factors, as this in itself will dramatically increase your premiums. Play the long game.
Undervalue stay at home parents. Often not fully appreciated for the role they do by society as a whole, the full-time mum or dad – if their position was a paid one – would draw an amount equivalent to an annual salary said to be in the region of £32,000 per annum, according to a recent report. So never knowingly underestimate this when compiling your own life insurance blueprint.
Join forces with your partner. Ignoring the odd statement the intent remains steadfast. By taking out a joint life insurance policy with your partner you could jeopardize future earning potential in the unfortunate event of one or another prematurely departing. Despite dual life insurance policies once being the best option, in recent years it’s been advised against, although on the surface often appearing to be a more cost-effective approach at source. Two separate polices is now recommended, so if one partner passes the other policyholder can keep their policy, which essentially transpires as you receiving double the cover for your money from the outset.
Don’t rush in where angels fear to tread. Or in less prosaic words, don’t purchase life insurance unless you really need it. For example, as a single person not having any dependents to provide for as such, then you don’t necessarily need to arrange life insurance cover.
Don’t be too hasty. Cancelling an existing life insurance policy before rubber-stamping a new or alternative version could leave you in no-man’s land. Always ensure that your new life insurance agreement is activated prior to terminating a previous incarnation.
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