Life Insurance Advice is Free – So Get Some

Is it worth getting advice about life insurance?

It is thought of by many as a straightforward type of insurance that just pays an amount of money if a policy holder dies but there is a lot more to it than that.

There are many different ways life insurance policies can be set up and tailored to offer a solution to a wide variety of needs.

Cover can:

  • Stay the same
  • Increase (at different rates depending on insurer)
  • Decrease at a fixed rate (regardless of mortgage rate)
  • Decrease and include a Mortgage Repayment Guarantee (only from certain insurers)
  • Pay a lump sum
  • Pay a monthly amount (Family Income Benefit)
  • Come with ‘Critical Illness Cover’
  • Come with ‘Terminal Illness Cover’
  • Include ‘Waiver of Premium’
  • Be placed in ‘Trust’ – so it pays out quicker and avoids Inheritance Tax
  • Have ‘Guaranteed’ monthly premiums
  • Have ‘Reviewable’ monthly premiums
  • Provide cover for a fixed number of years (the ‘Term’)
  • Provide ‘Whole of Life’ cover
  • Cover joint lives
  • Payout when the first person dies
  • Payout when the second person dies
  • Not pay anything if important information is not disclosed

That isn’t everything.

When you start to look more closely at some of those individual points they each have their own list of alternative ways to be set up.

‘Waiver of Premium’, an optional extra, takes over paying for a policy if the policy holder is unable to work due to sickness or injury. It can be set up to start paying after 4, 8, 13, 26 or 52 weeks. It can be configured on an ‘Own Occupation’ basis or a ‘Work Tasks’ basis.

Critical Illness Cover is extremely varied. The number of illnesses covered by insurers ranges from 35 right up to 150. Some pay for mastectomies, some don’t. Some cover prostate cancer, some don’t. A ‘buy back’ optional extra means that a certain level of cover can be reinstated after a claim. The disability benefits can be set up as ‘Own Occupation’ or ‘Work Tasks’ depending on employment status, job title or participation in hazardous activities (including riding a motorbike).

‘Trusts’ help with quick pay out of claims and also enable a policy holder to name specific beneficiaries, keep the proceeds of a claim outside their estate and so not subject to inheritance tax and they can be ‘Bare Trusts’, ‘Split Trusts’, Discretionary Trusts’ and include a ‘retained benefit’ clause if necessary.

If this article went into detail about all of the above points it could stretch to dozens of pages of information and still not really help someone determine the correct level of insurance for them.

If all of this is starting to sound complicated and overwhelming it only serves to strengthen the argument for the importance of getting some life insurance advice.

Buying cheap and cheerful insurance online, without getting advice, means the onus is on the buyer to make sure they do it correctly. Buying the same cover through a regulated adviser means there is more protection from the Financial Services Compensation Scheme and a regulatory body to turn to (The FSA or the Ombudsman) if things go wrong.

Getting advice from an adviser will provide peace of mind.

If there are any doubts about getting life insurance advice, remember this:

1/ Life insurance advisers are paid commission by the insurance companies so they don’t have to charge fees so the advice is free.

2/ If the adviser gives bad advice and the customer cancels their policy the adviser will have to give back the commission. That is a serious incentive to give good advice from the start and find the best solution.

Cheap is not always best and when advice is free it just makes sense to speak to someone first, even if you don’t end up using their services!