Guidelines in Purchasing Life Insurance
If you should decide to invest on a life insurance policy, which is a life plan that pays out a lump sum when a policyholder dies to financially protect his family, it may be wise to be knowledgeable on the different types of life cover and which one is the best for you. Don’t buy a life protection policy from a popular insurer right away. Study the terms of their policy if it is within your budget and if it is what you really need. Different policy options are offered based on different client needs. If you are unsure, try to sleep on it before deciding. Think about what you really need.
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If you are confused of the many insurers that abound, approach an independent personal financial adviser who would objectively offer free advice to aid you on selecting the right insurer and life cover. Online life insurance specialist godirect.co.uk is among those who offer professional advise yet allows its clients to make independent choices. Their site also features finance tools to those who need it. Ask your adviser to weigh and inspect premium options, which are either guaranteed or re viewable. A guaranteed policy premium is a consistent amount to be paid to the insurer until the end of the life protection policy. A re viewable premium may be increased by the insurer after a certain period. It may be insightful to disclose all information, even minor issues, to the insurer to avoid a claim being turn down.
Hidden Money – Can you see what I see?
You must also determine if the lump sum your family or beneficiary will receive once you pass on will be enough to support your dependants or to pay off loans. It is also advisable to place your life insurance plan in trust so that it will not raise the value of your estate once you die. Once the value of your estate goes beyond the inheritance tax allowance, a 40% tax will be charged to the excess amount. If you put your life plan in trust, it will be considered not part of your estate.
Major Kinds of Life Insurance Policies
a) Term Insurance Plans
Many insurance companies and financial institutions offer this kind of life insurance plan since this if the simplest and cheapest. A term is set for you to pay the premiums either monthly or annually. If you are still alive when the term ends, you cannot make a claim. However, paying the monthly premiums will still give you coverage. Although, coverage is extinguished once you cease premium payments. A lump sum will be paid to your dependants if you die before the term expires.
b) Whole Life Insurance Plans
A policyholder can always be assured that the insurers will pay your whole life insurance claim. Unlike term insurance plans that will payout claims depending on the expiry of a policy term and the death of the policyholder, whole life insurance claims are guaranteed to be paid in a lump sum upon death. Although, compared to term insurance plans, premiums of whole life insurance policies are higher.