Life Insurance - Top Tips for buying online
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Life Insurance: Top Tips for Buying Online
Summary
Purchasing life insurance online is straightforward. However, this article offers five money-saving tips that many may overlook. Essential reading for anyone looking to get the most value.
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With more people in the UK choosing to buy life insurance online, numbers are doubling every two years. The appeal is obvious?"lower prices and the fact that life insurance is fundamentally straightforward.
Despite its simplicity, most websites direct online clients to telephone-based help services staffed by experts. This ensures that support is available when needed.
Yet, it's wise to have some top tips on hand to guide your online life insurance shopping. They'll help you ask the right questions and find the best policy.
1. Write Your Life Insurance Policy in Trust
Having your policy written in trust means that in the event of a claim, the payout goes directly to your chosen beneficiaries. This setup bypasses potential inheritance tax, potentially saving you a hefty 40%. Inform your online broker that you want your policy in trust and provide the names of your beneficiaries. This service is usually free, making it a win-win situation.
2. Choose Between Reviewable and Guaranteed Policies
Initially, a reviewable life insurance policy may be cheaper, but a guaranteed policy tends to be more cost-effective over time.
- Guaranteed Policy: The insurance company promises not to increase your premium.
- Reviewable Policy: The insurer can periodically review and potentially increase your premium. Reviews generally result in higher fees and typically occur every 2 to 5 years.
In early years, reviewable policy premiums are lower but will likely surpass guaranteed premiums in 7-10 years, potentially doubling within the next 10 years. If your budget allows, a guaranteed policy might be your best option.
Note: Many insurers no longer offer guaranteed rates for standalone critical illness insurance due to high claim rates. However, you may still find a policy combining life and critical illness cover with guaranteed rates, which can be beneficial.
3. Consider Separate Policies Over Joint Life Insurance
Joint life insurance usually pays out on the first policyholder's death, leaving the surviving individual uninsured and older, which could make future coverage more expensive. Separate policies can provide more comprehensive coverage, offering peace of mind despite a slightly higher cost.
4. Add Critical Illness Cover When Taking a Life Insurance Policy
If you foresee needing critical illness insurance, consider adding it to your life insurance policy now.
- Cost-Effective: Combining the two is cheaper than buying separate policies.
- Guaranteed Rates: You might still find a combined policy with guaranteed premiums, offering great value.
- Age Factor: Premiums for critical illness cover increase with age, so earlier is better.
5. Understand the Difference: Terminal Illness vs. Critical Illness Cover
There's a significant difference between these two types of cover:
- Terminal Illness Cover: Pays the insured sum if a doctor diagnoses you with a condition expected to result in death within 12 months. This is generally included in good life policies at no additional cost.
- Critical Illness Cover: Pays out if diagnosed with a severe illness, regardless of life expectancy, covering conditions like cancer, heart disease, or multiple sclerosis. It provides financial support for potentially many years, unlike terminal illness cover which is more limited.
Critical illness cover offers more comprehensive protection, which is why it typically costs more.
By understanding these tips, you can make more informed decisions and find the right life insurance policy online.
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