Life insurance may seem like an unnecessary benefit that costs more than it is worth. A careful review of this cover reveals many reasons why it is worthwhile. If you are considering whether to spend money on a life insurance policy, review this information to identify reasons that your money would be well-spent on this cover.
Recognizing the benefits of life insurance requires taking a long-term, big-picture approach to life.
Top Reasons to Buy Life Cover
The most important reason to purchase life insurance is to provide a secure financial future for loved ones. Benefits from a life insurance policy can be used to cover final expenses such as medical bills or cost of a funeral or cremation. A life policy can be used to arrange a reduction in mortgage repayments or the payoff of a mortgage balance. Life insurance benefits can even be used to cover educational expenses for children or grandchildren.
This benefit is not always expensive. Premiums are based on the type of cover, policy limit and term, and age and health status of the insured. As a rule, the younger the insured, the less expensive the policy and the easier it is to obtain approval. Cover is available from several companies in the UK and many providers offer multiple options, making it easy to find a policy that is affordable and features a sufficient level of financial benefits.
Compare Policy Features Before Committing
Life policies differ so it is important to read the terms and conditions to determine what is covered and what is excluded. The document featuring this information usually carries the name “Key Features” or “Key Facts.” Compare the features of different policies from several carriers to find the cover that is best for your situation.
Since some policies stop providing cover once the insured reaches a particular age, confirm the age limit for the cover being reviewed. Learn about the policy exclusions, which may include existing medical conditions, participation in dangerous sports, or death from alcohol or drug abuse.
Identify whether a term life policy features a lump sum payment for diagnosis of a terminal illness during the cover period. Find out whether the plan includes extra benefits such as cover for a critical illness. These benefits are sometimes included at no cost but many times require extra premium payments. While investigating premiums, ask whether the provider imposes a penalty if a payment is skipped during the policy term.
Financial Aspects of Life Cover
Though life cover provides a benefit to survivors, it is also important to consider the financial impact during the present period. Ask whether the policy has a cash-in value and find out how policy cancellation is handled. Consider life cover tax implications for beneficiaries and structure the policy accordingly.
Based on the value of your estate, beneficiaries may have to pay inheritance tax on the life benefit paid unless the plan is placed in trust. Tax policies can change annually and this area of the law tends to be complicated so getting advice from a financial professional is recommended.
If the benefits and features of life insurance cover seem attractive, find an affordable plan that offers an adequate benefit. Designate beneficiaries carefully because these are the individuals who will gain financially upon your death. Ask all policy-related questions before signing the plan documents and ensure that premiums are always paid in order to maintain cover over the years.