Whether we have dependants to provide for or debts that we need to cover, life insurance has become an essential part of our modern financial world. Many people take out life insurance along with mortgages, credit or as part of their employment contract; many do this without looking into their options. In order to make sure you get the best deal there are a few things to consider.
You do not have to go with the lenders recommended insurer
Most people are offered insurance when they are accepted for a form of credit. In the case of a mortgage, appropriate life insurance cover is often a stipulation of securing a loan on a property. It is designed to make sure that if you die whilst you still owe money on the property, the mortgage repayments will be met for your dependants. However, many people do not realise that they can make their own arrangements for life insurance cover and instead choose to go with the lenders recommended insurer. However, if you shop around prices can vary dramatically.
Insurance premiums can be fixed
Many people are used the rigmarole of yearly car insurance and its constant payment hikes. They worry that taking life insurance will mean similar issues. However, many insurance companies offer life insurance policies with fixed payment terms. The average term for fixing a life insurance premium is ten years after which the insurance company will reassess your circumstances and your payment plan. In addition, if your cover is designed to protect a mortgage the plan can be tailored to start and end with the mortgage term. Furthermore, for people who have capital and interest mortgages payments can even be set to fall as the amount you owe decreases.
You may already have enough cover
The majority of people will need to take out a policy to protect their new loan or mortgage. However, if the cover is not required to be attached to a mortgage, many people may already have sufficient cover in their employment benefits. Those who pay into pension schemes as part of their employment should check their terms and conditions as they may already have life insurance cover as part of the pension scheme. These are often referred to as “in service death grants” and are designed to pay a lump sum on death if still in employment with that company. The lump sum is usually a multiple of your annual salary and can be paid directly to a named beneficiary. However, you must remember that this benefit cannot be used to cover a mortgage and will not be accepted as such by a lender.
Insurance premiums rise with age
Many people considering life insurance cover put it off as an unnecessary expense. It is often something that younger people consider a sign of growing old. Others fear that pre-existing conditions will cause there premiums to be high. It also inevitably involves thinking about death, which puts many people off. However, life insurance premiums are worked out by calculating your age against any health issues, occupation and lifestyle choices. In addition, the term of the insurance has to match the amount that you pay in and premiums will be adjusted to take this into account. Quite simply, the longer you leave it, the higher your premiums will be.