Your life assurance comparison checklist – the big five ways to save January 19, 2010
Posted by admin in : Buying Life Cover , add a comment1. Know what you need
Only when you know exactly what type, amount and duration of life assurance you need can you compare like with like and accurately reveal the bargains. If you’re still not sure what’s right for you, consult an independent financial or insurance adviser at www.unbiased.co.uk*. If you’ve got a good idea about the level of risk and what type and amount of cover should adequately protect it, then you’re less likely to buy too little or too much.
2. Reduce your risk
Make yourself an easy risk and you’ll be rewarded with low premiums. Stop smoking, reduce your alcohol consumption and lose any excess weight to see your premiums tumble. Don’t buy more cover than you need and consider a policy benefit that pays an income (Family Income Benefit) rather than a lump sum if appropriate to the risk you’re covering.
3. Shop around
The biggest potential savings come from compare life assurance policies from as much of the market as possible. Use price comparison sites and brokers that can instantly compare policies and premiums from multiple insurers. Create a shortlist of the cheapest insurers from your comparison research and ensure that these policies are suitable for your needs. Check the cover options and flexibility so that your policy can be altered to meet your changing needs.
4. Try a discount life insurance broker
A discount life insurance service will sacrifice some of the commission paid by insurance companies to reduce the premiums they quote. The savings can be substantial but some brokers offer bigger discounts than others for exactly the same policies so compare these too.
5. Make sure it still fits
The life cover you buy today could be totally inadequate or a waste of money tomorrow. A lot can happen in five or ten years. That’s why it’s vital to review your life assurance need every year to ensure all risks are covered and that you aren’t under or over insured. Again, this highlights the importance of choosing a policy and insurer that allows some flexibility to change your cover.
*Neither Life Saver or Mint Financial Services are responsible for the content of these third-party websites.
How to calculate the right amount of low cost term life insurance November 2, 2009
Posted by admin in : Buying Life Cover, Life Insurance Tips , add a commentToday’s post is going get down to numbers and clarify the amount and duration of life insurance required to cover your risk without buying too little or too much protection.
Buy too little and you’re still exposed to financial risk, buy too much and you could be wasting money at best or worse have to cancel the policy because you can’t afford it.
How much life cover do you need?
Well how much time do you have? There’s a short and a long answer to that question but as the answer is so important to your financial stability, we would encourage you to spend a few minutes taking a more detailed look at your finances to reveal your cover need number.
If you really don’t have time then a rough guide is to multiply your annual salary by six, and use this as a minimum cover amount. However, please remember that this is a very basic method that doesn’t take into account your personal circumstances and needs. Therefore you could be under-insured.
Again, we would recommend that you put the kettle on, sit down with your most recent bank statements and make a detailed assessment of your current financial position.
How to find your cover need number
Don’t be deterred by the name… ‘cover need number’. It’s quite easy to work out when you’ve got all your documents to hand. We’re going to take it step by step until we’ve got that magic figure. Here goes…
Step 1 – Cover Duration
First, you need to decide how long you need life insurance for as this can influence the total amount of cover you’ll need. If you’re needing a Whole of Life Insurance policy you can skip this step as you’ll be covered for life anyway.
Remember that life cover is to protect those who are financially dependent upon you from being disadvantaged by your death. As you’re reading this post, you’d no doubt answer Yes to the question “If I died today, would anyone be financially worse off?”. The question you need to answer now is “When do I expect to answer no to that question?”.
Will it be when you pay off your mortgage? When your children leave home? Or when you retire for example.
In short, how many years will it be before your current dependents are no longer financially dependent upon you? This figure should be considered as the duration of your term life insurance policy.
More than likely, your answers to these questions will be best guesses or estimates and there are a range of other factors you could consider. Unfortunately, only you and your dependents can way up all these factors and decide upon an accurate policy term figure.
Even so, the key question is simple… at what point can you reasonably say that no one other than yourself will rely upon your financial support?
This is serious stuff we’re dealing with here so it’s better to take your time and be safe rather than sorry. Remember though, if you are in any doubt, consult an independent financial or insurance adviser for unbiased guidance.
Write your chosen policy term here: years
Step 2 – Current Annual Living Expenses
From your bank statements and other documents work out a total figure for your current annual living expenses less any expenses that would cease on your death.
It might be easier to work out a monthly figure and just multiply it by twelve to get your annual figure. Don’t include any debt repayments on a mortgage, credit card or loans as we’ll deal with these next. Multiply this figure by your chosen policy term from step 1 above to give you your total living expenses.
Write your annual living expenses here: £
Write your total living expenses here: (annual expenses x policy term) £
Step 3 – Current Debts
Get your most recent mortgage, credit card, loan or finance statements and add up all the outstanding balances to give a total debt figure.
Write your total debts here: £
Step 4 – Future Financial Obligations
If you expect to have additional financial obligations in the future such as paying for a newborn child’s nursery care or eventual university education, add these together below.
Write your total future financial obligations here: £
Step 5 – Existing Cover
If you have any existing life insurance covering your mortgage for example, or cover provided by an employer, add it all together.
Write your total existing cover here:
Step 6 – Here comes the Maths bit…
First, add the figures together from steps 2, 3 and 4. Next deduct the existing cover figure from step 5. The figure you’re left with is your ‘cover need number’.
Write your Cover Need Number here: £
Please bear in mind that this cover need number is only a guide to the amount of life cover you should buy. If you are in any doubt about calculating this figure, please take advice from an independent financial or insurance adviser.
Think twice before buying joint life cover online October 28, 2009
Posted by admin in : Buying Life Cover, Life Insurance Tips , add a commentWhen buying life cover online, many people make the mistake of just comparing price. Cost is of course an important consideration, but if you’re choosing between joint life and separate individual policies, the least expensive option can sometimes prove unsuitable in the long run.
Joint life insurance is cheaper, but…
Many couples take out joint life insurance to cover mortgages or to provide financial protection for their children if one partner should die or become critically ill.
However, by trying to save a few pounds with a joint policy rather than two separate ones, you have to settle for cover that offers just one pay out leaving a surviving spouse uninsured.
On the surface, the cheaper joint life option may seem more attractive for a young couple with children, a mortgage and a tight budget. If one partner dies, the surviving partner can use the insurance pay out to cover the mortgage, thereby providing the family with some security. The down side is that the partner who is left behind is then uninsured and unprotected, because the policy terminates after a single pay out. If this occurs fifteen or twenty years after the policy was first purchased, the surviving spouse may be in their forties, possibly even in poor health, making it harder and more expensive to buy new cover.
Another disadvantage with a joint policy is that while it works well enough to pay off a mortgage or other debt, it’s not an ideal method of replacing the lost income of the deceased partner. This tends to be a problem because each partner will most likely have a different level of income, and because a joint life policy insures each partner for the same amount, it cannot account for the varying levels of protection each may require.
The practical solution
The most practical solution for all of these problems is to purchase two separate policies. This may be slightly more expensive than joint cover, but in the long term, there are several advantages.
- Most importantly, you are covered with twice as much insurance protection.
- If one of the policyholders dies, the surviving partner is still covered.
- If a couple is married and later separate, dividing up the insurance is a simple matter. It’s impossible to divide a joint policy between two separating partners unless a separation option is included in the policy.
Overall, buying two separate life cover policies does cost more, but in the long term the advantages more than pay for it. Given that buying two separate policies can be only marginally more expensive than joint cover, it can be more practical and prove better value for money.
Choosing mortgage life cover to protect your home October 26, 2009
Posted by admin in : Buying Life Cover, Life Insurance Policies , add a commentPurchasing the first family home is a time when many people begin thinking about buying mortgage life cover to go along with it.
A mortgage is very often the most significant financial decision that any individual makes, and it’s always prudent to find a way of protecting it to ensure that your loved ones will not suffer financially from the loss of your income if you should die. A carefully-chosen life insurance policy is an ideal method of achieving this protection. So what are your options?
Level or decreasing term life cover?
The most common way of protecting your mortgage is to purchase term life insurance. Selecting life cover for mortgage protection requires making a choice between two different types of insurance—level term or decreasing term insurance. The choice is normally dictated by the type of mortgage you have, repayment, interest-only or a combination.
Level term life cover is most often used with an interest-only mortgage where the outstanding debt will stay the same, so the amount you are insured for remains constant over the life of the policy. A decreasing term policy is commonly used to protect a repayment mortgage as the size of the potential pay-out decreases as the mortgage is paid off. Regardless of which type you choose, the policy ends automatically if a claim is made, or when the full term is reached.
The cost of mortgage life cover
The cost of mortgage life cover depends on several factors. The most important being the amount you borrow, and the amount of time you’ll require to pay the mortgage in full. As will all types of life cover, the cost also depends on your lifestyle, age, and physical health. Lastly, the type of policy you choose, level or decreasing term insurance, also affects the cost.
In most cases, level term mortgage cover is more expensive than the decreasing term variety. This is because with decreasing term insurance, the size of the pay-out decreases over time, so the overall cost of premiums is reduced to reflect that. Because all other aspects of these two types of policies are more or less equal—in both cases, the mortgage is fully paid in the event of a claim being made—the type of insurance you get will typically depend on the type of mortgage and how much you can afford.
Level term cover does offer one advantage that decreasing term insurance does not. Because the size of the pay-out is constant over the life of the policy, your dependents will benefit from increased financial security if there is money left over after the mortgage has been paid.
Tips for buying flexible UK life cover October 25, 2009
Posted by admin in : Buying Life Cover , add a commentMost people’s life insurance needs change over time—when they take out a mortgage, get married, have children, pay off the mortgage—their insurance needs increase or decrease accordingly.
One of the most important aspects of buying life insurance, therefore, is the flexibility of your policy. Choosing UK life cover that includes Guaranteed Insurability Options (GIOs) is an excellent way of achieving this flexibility, and keeping your future potential insurance costs as low as possible.
What are Guaranteed Insurability Options?
GIOs are written into some, but not all, term life policies and allow the policy owner to increase their cover at some point in the future if needed. The crucial point is that they are able to increase their cover without the need for additional underwriting.
This is important because it’s the process of underwriting that determines your premiums. Underwriting is the way an insurer quantifies the level of risk that insuring a given individual represents to the company. All of the questions and information that insurers ask for when you apply for a policy are used to determine the likelihood that you’ll make a claim on the policy while it’s in effect. If the company determines you are unlikely to make a claim, you’ll benefit from lower premiums.
Why are GIOs better than getting a new policy?
Choosing a policy with GIOs can save you money on your life cover premiums in the future simply because GIOs allow you to purchase additional insurance without having to go through the underwriting process all over again. This is particularly useful if your health has deteriorated since you originally bought the policy and you then need additional cover.
Often several years will elapse between the time you purchase a policy and the time you decide you need additional cover, and one of the main factors that insurers consider during the underwriting process is the health status and age of the individual.
When do GIOs apply?
Not all insurance companies offer GIOs on their policies, and those that do may give varying options. Some GIO life events include:
- A marriage or civil partnership
- The birth or adoption of a child
- Changes in career or salary
- Obtaining or increasing your mortgage
- Separation of a joint policy—in this case the joint policy can be separated into two policies if you are separated or divorced. Both parties keep the same level of insurance protection as they had on the original policy.
Remember that not all companies will offer all the GIOs listed—if you’re interested in the additional protection that GIOs provide it’s particularly important to shop around to find the options that most benefit you.
GIOs can be exercised if you’re under 55 and your original policy was underwritten at standard rates (meaning that at the time you were considered of average or lower risk).
Do you really need Life and Critical Illness Insurance? October 23, 2009
Posted by admin in : Buying Life Cover, Life Insurance Policies , add a commentOver the last 20 years or so the take up of Life and Critical Illness Insurance has increased dramatically as the benefits of this type of cover become better known.
This is particularly true for people who are setting up a new mortgage who perhaps would previously have just made do with ordinary term assurance. Nowadays however couples and singles want the re-assurance that if the worst happens they won’t have the worry of paying the mortgage.
This is where combined Life and Critical Illness cover be of value because it provides protection which will ensure that if the worst does happen, money is quickly provided as either an ongoing tax-free income or tax-free lump sum. One note of caution though, combining life and critical illness cover in the same policy might be slightly cheaper than taking out separate policies, but if you should make a claim on the critical illness option the whole policy may cease leaving you without life cover when you may be considerably older and in poor health.
In its most basic form Life and Critical Illness Insurance can be relatively inexpensive by providing cover on a reducing basis, perhaps to cover a repayment mortgage or loan. Another way of keeping the cost of Life and Critical Illness Insurance low is to look for a plan which provides only basic Critical Illness Insurance. These plans usually cover the three main critical illness conditions such as Cancer, Heart Attack and Stroke which represent the vast majority of claims. This is a bit like insuring your car third party instead of fully comprehensive but if money’s tight this type of cover is better than none at all.
Life and Critical Illness Insurance provides remarkable value particularly for younger people. For example a male non-smoker aged 25 would pay just £16.21 per month for £150,000 of decreasing Life and Critical Illness cover over 25 years. This however assumes that you are in good health with no family history of critical conditions.
The premiums for this type of cover are based upon the perceived risk. The fact is that if you are in your 40’s you have much more chance of contracting a critical condition than dying before you are 65. And whilst you have a good chance of surviving these conditions your finances may not be so lucky!
What if you can’t afford to buy life insurance with critical illness protection included? October 22, 2009
Posted by admin in : Buying Life Cover, Life Insurance Policies , add a commentThere’s no doubt that good critical illness insurance can provide valuable financial protection for you and your dependants whilst providing more comprehensive cover that a life insurance policy can’t offer.
The problem with buying life insurance with critical illness insurance included is price. Critical illness cover can be considerably more expensive than standard life insurance and the difference increases with age. So if you can’t afford to include the critical illness cover option in your policy, what other options are there that will provide financial support if you are critically ill or seriously injured?
There are a number of cheaper policy options that will provide a regular income payout for varying periods of time if you cannot work due to illness or injury. But choosing the right one depends upon the type and level of risk you want to insure.
For example, will you only need enough to pay your mortgage and other household expenses every month for a year or so or will you need your current income to continue for as long as you are unable to work?
The only real cheaper alternative to critical illness cover is an income protection policy. This cover pays up to around 50% of your current pre-tax annual income if you cannot work due to illness or injury and will continue to payout until you return to work, die or the policy ends, whichever is sooner. The disadvantage of income protection insurance is the cover limits imposed and that the benefit may be reduced by any income you receive from state benefits and other protection policies.
If you can’t afford standard income protection cover, the next cheapest alternative could be a budget income protection policy that imposes further restrictions. Otherwise, if you only require cover to protect your mortgage payments, there is Mortgage Payment Protection Insurance, also known as Accident, Sickness and Unemployment cover (ASU), which pays a fixed amount equal to your mortgage repayments and some additional expenses for limited periods of one or two years.
Please bear in mind that the quality of these MPPI or ASU policies can vary substantially so if you are unsure, take advice.
How to control the cost of your life cover quote October 21, 2009
Posted by admin in : Buying Life Cover, Life Insurance Tips , add a commentWhilst you can’t control many of the factors that affect your life cover quote premiums, there are a few options you can use to your advantage if you know what to look for and what to do.
First, it’s important to understand what influences your life insurance premiums so that you can take advantage of any opportunities to reduce them.
Have you got the risk factor?
Like all insurance, life cover is about insuring a risk – in reality two risks. From the insurers point of view, they will only be thinking about the risk to them of having to pay out a sum of money if you die as a policyholder. Then there’s the risk to your dependents of having to cope financially if you died as the main income earner for example.
In effect, a life insurance policy is the transfer of your risk to an insurance company in return for a sum of money that is related to the amount of risk you are transferring. And the insurance company will only be willing to take on your risk if you fall within their risk factor which can often differ between companies.
Insurers calculate your risk factor by employing a process called ‘underwriting’ to assess the chances of you dying as a policyholder. The greater the risk or chances of you dying, the higher your premium will be. But if you’re considered too risky, your application could be postponed until more information can be gathered or declined altogether.
The type of policy you choose can also affect the risk, that’s why Whole of Life Insurance policies are so much more expensive than Term based plans, because the insurer knows that they will definitely have to pay out on a Whole of Life policy.
So how does the insurer assess your personal risk factor?
It all comes down to good old questions and answers.
The questions…
When you apply for a life insurance policy, the application form will ask you a series of detailed questions designed to assess every part of your life that could influence your risk to the insurer. These risk based questions include:
- Your age and gender
- Your job
- Your legal history such as convictions
- Type and amount of cover required
- Your current health including weight, tobacco and alcohol use
- Your medical history
- Your family medical history
Whilst a great deal of effort goes into designing these application forms, some of the questions can still be confusing. If you are ever in any doubt, always ask the insurer for clarification before completing the form.
And that brings us to the next part.
Your answers…
Whilst the answers you give to these questions will directly affect the premium you pay, don’t be tempted to underestimate your weight or leave out a hospital visit to save a few pounds.
Don’t forget that your life insurance policy is a contract between you and the insurer which includes a signed declaration that all information you provide is true and correct. If you ignore this and a claim is made, the insurer will reject it and cancel the policy if you are discovered to have withheld information or given false details.
More importantly, your dependents will be without the valuable funds they need to secure their financial future when they need it most. You could also be prosecuted for fraud.
So always tell the truth and give complete answers. If in doubt, declare it anyway or contact the insurer.
How does all this help you?
If you want to take control of the premiums in your life cover quote, it’s important to understand how it’s calculated and what factors have the greatest impact.
All the risk questions above can have a big impact on your premium, but the ones that have the biggest direct impact which you can control are:
- the type and amount of cover required
- your weight
- your alcohol consumption
- your tobacco use if you smoke.
Changing any of these for the better will affect your premiums but stopping smoking will result in the biggest savings. Bear in mind that most insurers will require you to have been a non-smoker for at least 12 months before offering you non-smoker rates.
Please note that this information does not represent personalised advice and is not a recommendation that any product matches your circumstances. If you should have any doubts please contact an independent financial adviser so that your individual circumstances can be considered.
A quick tip for a faster UK life cover application October 20, 2009
Posted by admin in : Buying Life Cover, Life Insurance Tips , add a commentIf you’ve already submitted an application for UK life cover, well done. It shouldn’t take more than seven working days to get an underwriting decision if your circumstances are straightforward.
Even if the insurer needs to write to your GP for more medical details, you should have a decision within a few weeks. Just remember to keep chasing your doctor’s surgery as they can delay the whole process by weeks if they’re a bit slow.
Remember, the squeaky wheel gets the grease.
The medical history report option
If the insurance company need to request a medical history report from your GP and you’ve ticked the option on your application form to see the report, it could delay your policy by as much as two weeks!
Many people wrongly assume that by ticking the option to see the report they will just be sent a copy in the post. In fact, the surgery won’t return the medical report to the insurance company until you’ve physically been in and viewed it.
So, if it’s not that important to you, skip the option and you’ll avoid any unnecessary delays. If you weren’t aware of this and have already submitted an application with the report option selected, contact your insurer or broker to get it removed.
If you’ve not made any progress with your life cover yet there’s no time like the present, particularly as life insurance get’s more expensive the older you are. In fact, if you have a birthday or even a quarter birthday coming soon, you’d better get moving as your quotes will be going up.
It’s quick, simple and most likely cheaper than you expect. Just head over to our discounted life insurance quote page and choose your cover type to get the ball rolling.
The importance of flexibility when buying affordable term life insurance October 11, 2009
Posted by admin in : Buying Life Cover, Life Insurance Policies , add a commentIf you’ve been shopping around online for affordable term life insurance you’ll have noticed that priority is often given to price when comparing policies.
Whilst most of us are restricted by a budget, price should not be the only consideration and can end up costing you more if it’s the only factor in your search.
Another important consideration is how flexible the policy is should your needs or circumstances change once the cover is in force. This is particularly important for policies with a longer term of ten years or more. A lot can happen in ten or twenty years, from simply stopping smoking to getting married or having a family.
Whatever changes you face, your cover should be flexible enough to adapt to both more or less protection. As the cost of life cover increases with age, the alternative could mean having to cancel existing cover and replace it when you are five, ten or even twenty years older and premiums are higher.
If you are in any doubt, pick up the phone and speak with your chosen insurer before buying. Check that existing cover can be increased, decreased and extended to include additional benefits such as critical illness cover for example.
