1. Always write a Life Insurance policy “in Trust”.
You should have your Life Insurance policy written “in Trust”. This means that in the event of a claim, the money will go directly and quickly to the person(s) you specify and avoids all Inheritance Tax. That could represent a tax saving of 40%!
2. Initially Reviewable Life Insurance Policies are cheaper but Guaranteed policies normally work out cheaper in the medium/longer term.
With a “Guaranteed” policy the insurance company guarantees never to increase your policy’s premium.
With a “Reviewable” your premium will increase. The insurance company reviews your premium regularly (normally every 2 to 5 years but this can vary) and has the right to increase your premium on each review.
When you initially start a policy, a “Reviewable” contract will have a have lower premium than the equivalent “Guaranteed” version – but “Reviewable” policies can catch up quickly and, in the longer term, are more expensive.
Some insurance companies have stopped offering “Guaranteed” rates for life insurance policies that includes Critical Illness cover. This because they have experienced higher claim rates than originally expected. “Guaranteed” rates can be an especially good value and if we are able to quote you for a “Guaranteed” policy that includes critical illness cover, you should very seriously consider it.
3. Thinking about a Joint Life Insurance Policy?
A Joint Life Insurance policy will pay out as soon as the first policyholder dies. This leaves the second person uninsured and probably at an older age. Older people can struggle to get life insurance at an affordable premium, so consider taking out separate policies now. Overall it will work out a little dearer – but you get double the cover and double peace of mind.
4. Now could be a good time to add Critical Illness to your new Life Insurance policy.
Are you likely to need Critical Illness Insurance in the future? If so, consider adding it now to your life insurance policy.
Why? There are two reasons:
- A policy which combines Life Insurance with Critical Illness will work out significantly cheaper than buying two separate policies.
- You may be able to buy a combined Life and Critical Illness policy with a guaranteed premium. This is a big advantage as fewer life insurance companies offer a guaranteed premium on separate life insurance and Critical Illness policies.
(Read Tip 2 for more details)
5. Do you want your life insurance policy to include health cover? Make sure you understand the difference between Terminal Illness and Critical Illness cover.
It’s important to understand the difference between Terminal Illness and Critical Illness cover because there’s a world of difference between them.
Terminal Illness cover pays out a 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.
A Critical Illness policy pays out a lump sum if you are diagnosed with a wide range qualifying chronic illness and, with many, you could 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.*
Critical Illness cover insures you against a much wider range of risks than terminal illness cover and it will alwayscosts you extra.
*Please note that policy conditions do vary between insurance companies.