Life insurance can make the difference between people being able to focus on dealing with grief and people being forced to confront harsh financial realities at a hugely painful time. While the statistical likelihood of dying goes up with age, death claims even young lives. What that means in practice is that life insurance could very well be essential for anyone whose death could lead to financial hardship for people they love. In very simple terms, it’s too late to take out life insurance when you’re already dead. With that in mind here are some tips for arranging it.
Decide What Type of Cover You Need
Life insurance comes in two basic forms. Term Assurance provides cover for a set period. Whole of Life insurance, as its name suggests, will cover you until you die (assuming you fulfil the agreed conditions). In other words, Term assurance will only pay out if you die during the term of the policy. Whole of Life insurance is guaranteed to pay out at some point. It’s important to choose the right form of cover for your individual situation so this may be a good time to get some advice from a professional financial adviser.
Remember to review your level of cover
Change is a part of life and it needs to be incorporated into your financial planning. For example your first experience with life insurance may be when buying a home for the first time. On the other hand, when children come along their parents need to think about ensuring their family is provided for in the event of one or both of them dying. In this situation it may be suitable to obtain cover which increases over time to keep pace with inflation.
Home-makers need cover too
It’s easy to value earnings from employment, but it’s also important to remember the monetary value of home-making. You may need to think about child-care arrangements in the event of the death of the primary home-maker. You may also want to think about the value of the other tasks they perform such as cooking and cleaning.
Take action to make yourself an attractive customer
Nobody can stop the march of time, but we can take control of our lifestyles. Life insurance companies much prefer customers who are going to live to the end of the term or at least pay premiums for some years before they die. You can quite legitimately change your lifestyle and then either speak to your existing insurer or look for the best deal. If you’re a smoker then by giving up you can add any savings you make on your life insurance to the savings you make on packets of cigarettes.
Make sure the payout method is effective
It would be rather ironic to go to the effort of arranging appropriate life insurance only to forget about making sure that the proceeds go to the right people in the right way. For those with a partner and children, the choice may be between leaving everything to the partner and entrusting them with the care of the children, or leaving the children money in their own right. This all depends on your own individual preferences and situation. In either case, however, writing the policy in trust can be a hugely helpful move for those left behind. In short it ring-fences the insurance payout from the process of probate, meaning that it can be accessed relatively quickly.
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