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More and more people are buying life
insurance online and the numbers seem to be doubling
every two years. The reasons are clear. Prices are
lower on the Internet and life insurance is
fundamentally a simple insurance product.
Despite the underlying simplicity of life insurance,
most web sites channel their online clients through a
telephone based help and advice service manned by
experienced personnel. They represent your safety net
so if a little technical knowledge is called for, help
is at hand.
But it’s always a good idea to have a few Top Tips
in your back pocket when you’re shopping online for
life insurance. They’ll help you ask the right
questions and find the best policy.
1. Always have your Life Insurance policy “Written
in Trust”.
This means that in the event of a claim, the money
goes directly and immediately to the person(s) you
nominate when you first take the policy out. It also
avoids all possibility of your estate having to pay
Inheritance Tax on the proceeds of your policy and
that could represent a 40% tax saving !
All you have to do is tell the online brokerage
organising your policy that you want your policy
“Written in Trust” and the names of the people who
the life insurance company pay in the event of a
claim. They will then sort it all out for you. The
extra good news is that this service is invariably
free of charge. So it’s a win win situation and
there aren’t many of those around these days !
2. In the early years a Reviewable Life Insurance
Policy will be cheaper but a Guaranteed Policy will
work out a better buy in the longer term.
With a “Guaranteed Policy” the insurance company
guarantees never to increase your policy’s premium.
With a “Reviewable Policy” you agree that your
insurance company can review the cost of your policy
at regular intervals. But don’t be kidded – in our
experience a “review” is just another word for a
price increase. After all, who’s ever heard of an
insurance company passing up a chance to charge you
more! The review intervals are usually between 2 to 5
years but this does vary between insurance companies.
You will find the details of the review intervals on
the documents sent to you before you accept the
insurance – these are called The Key Features
Documents.
So, comparing otherwise like for like policies, in the
early years the premiums for a “Reviewable Policy”
will undoubtedly be lower than the premiums for a
“Guaranteed Policy”. Thereafter, the premiums for
a Reviewable Policy increase eventually catching up
with and overtaking, the premium for a “Guaranteed
Policy”.
In our experience, you can expect the monthly premiums
for a Reviewable Policy to exceed those of a
Guaranteed policy in about 7 to 10 years and then
within the following 10 years, more than double again.
If your budget is currently tight then by all means
choose a Reviewable Policy - after all your salary may
increase in coming years and ease the strain. On the
other hand, if the premiums for a Guaranteed Policy
are affordable, we think they represent your best buy.
A footnote. Many insurance companies have stopped
offering “Guaranteed” rates for standalone
critical illness insurance policies. This because they
have experienced much higher claim rates than they
initially expected. However, you may still find a
Guaranteed life insurance policy that also provides
critical illness cover. As we have explained,
“Guaranteed” rates are especially good value and
if you can get a quote for a Guaranteed life policy
that includes critical illness cover, you may have a
real bargain.
3. Thinking about a Joint Life Insurance Policy?
A Joint Life Insurance policy is usually written on a
first death basis. This means that the policy will pay
out on the death of the first policyholder, subject to
the policy being in force at the time. This leaves the
second person uninsured and older. Older people can
struggle to get life insurance at an affordable
premium, so rather than a Joint Policy consider taking
out separate policies now. Overall it will work out a
little dearer - but you get twice the cover and double
the peace of mind.
4. Taking out a Life Insurance Policy? Now would be an
ideal time to include Critical Illness cover.
Are you likely to need Critical Illness Insurance in
the future? Yes? Then consider adding it now to the
life insurance policy you’re arranging. Why? There
are three reasons.
Firstly, a Life Insurance policy combined with
Critical Illness cover will work out significantly
cheaper than buying two separate policies. Secondly,
as we have already explained in the footnote to Tip 2,
you may be able to buy a combined Life and Critical
Illness policy with a guaranteed premium. That could
be a real bargain. Finally, premiums for critical
illness cover increase rapidly as you get older – so
the sooner you take it out, the cheaper it will be.
5. Don’t confuse Terminal Illness cover with
Critical Illness cover.
There’s world of difference between Terminal Illness
and Critical Illness cover so it’s important to
understand the difference.
Terminal Illness cover pays out the insured lump sum
if a Medical Doctor diagnoses you with an illness from
which the Doctor expects you to die within 12 months.
Most good life policies automatically include Terminal
Illness cover at no extra cost. It’s basically an
early, and welcome policy payout.
A Critical Illness policy pays out the insured lump
sum if you are diagnosed with one of a wide range
chronic illness and there is no life expectancy
criteria. Indeed, with many of the insured illnesses
you could expect to survive for many years. For
example: certain cancers, heart disease, stroke,
multiple sclerosis, loss of speech, sight or hearing,
onset of Parkinsons or Alzheimers disease, third
degree burns etc. Say you were an engineer aged 40 and
you lost your sight. A Critical Illness policy would
pay out immediately and that money could well be vital
in helping you and your family through many difficult
financial years ahead. If you just had Terminal
Illness cover there’d be no chance of a payout.
So as you can see, Critical Illness cover is far more
comprehensive than simple Terminal Illness cover and
for that reason critical illness cover always costs
you extra.
By express-life-insurance.co.uk
Michael Challiner has 15 years experience in
financial services marketing at senior level, the last
5 of which specialised in online marketing. Prior to
that he spent 15 years in advertising with two of the
world’s top advertising agencies, J Walter Thompson
and Saatchi & Saatchi. Michael now works as the
editor of www.express-life-insurance.co.uk on behalf
of Andromeda Webs Ltd
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