Nobody wants to think about the possibility of a family tragedy, but such a painful experience would be significantly magnified by a financial spectre hanging over the grieving relatives.
Life insurance is about peace of mind and knowing that your family will be taken care of no matter what.
Picking the right insurance needn’t be an expensive exercise, provided you do your research.
Here are a few tips:
The Type of Insurance
- Whole of life insurance: Covers for the rest of your life and pays out on the event of one’s death. Whole of life insurance premiums are higher than term life insurance.
- Term life insurance: Covers for a specific duration of time. In the event of death outside the specified period, there will be no payout. The premiums for term life insurance are normally lower for this reason.
Sometimes life insurance policies are called life assurance policies; however both terms mean exactly the same thing. Various types of term insurance policies are cheaper than others.
- Decreasing term insurance: the amount of payout falls over the policy term, in the same way as a repayment mortgage.
- Level term insurance: the level of payout stays the same for the entire duration of the term. Generally more expensive than decreasing term insurance.
- Increasing term insurance: Increasing amount of premiums are paid each month over time that can be linked to health or lifestyle changes. Sometimes the increases are linked to rises in inflation.
Here are some tips on how to save:
- Cut the term duration and level of cover: Generally the bigger the payout and longer the term, then the higher the monthly cost for the premium. Decreasing these factors can save money.
- Guaranteed vs. reviewable premiums: Guaranteed premiums are a fixed amount each month, whereas reviewable premiums are lower to begin with then increase after occasional reviews by your provider. In the long term, guaranteed premiums work out to be cheaper.
- Take out a joint policy: Long-term partners can take out an insurance policy together as this is often cheaper than two individual policies. However in the event of death and payout, the policy is finished and the living partner is left without cover. Assess whether or not it is worth paying slightly more for single policies instead.
- Get in shape: It sounds simple and it definitely is! Losing weight, getting fit, eating well and quitting smoking are some of the simplest ways to live longer and also pay less for life insurance premiums.
- Critical illness add-ons: These add-ons cost money up-front, and cover for a list of critical illnesses such as cancer. These are worthwhile and give extra peace of mind, and are cheaper than buying separate coverage.
- Don’t lie: If the insurance company finds out that the policy-holder lied on their insurance policy to get a cheaper premium, the policy will be considered null and void. You might feel clever by keeping a secret, but it’s not worth it in the long run.
Photo Credit: kennymatic