Making sure you have got your family covered

ONE child in 20 has a parent die before they finish full-time education, says Money Saving Expert. That’s a pretty frightening statistic, but it’s even more frightening when you then find out that more than half of the population doesn’t have life insurance.

So why are so many people choosing not to take out life insurance? 31 per cent of people do not to take out life insurance because they don’t benefit from it personally. In fact people in the UK are so laid back about future planning for their loved ones, 34 per cent of people say that covering their possessions is more important than covering their lives.

Matthew Lloyd, head of life insurance at Confused.com, said: “It’s worrying that people are blaming cost for not having any life insurance when they spend so much money on other things, which are arguably less important than future planning.”

While this is not a comfortable thought, surely leaving your loved ones in a financial mess is far nastier? For this reason, we asked Darren Pickersgill, MoneySupermarket’s life insurance expert to put together this short introduction.

Q: WHAT ARE THE MAIN TYPES OF LIFE ASSURANCE?

A: There are four main types:

• Decreasing term assurance. This is designed to protect a repayment mortgage with a lump sum. Make sure the term and sum assured match your mortgage balance and term to be sure you are adequately covered.

• Level term. This will pay out a fixed lump sum. Best suited to leave a lump sum to protect your family’s standard of living or protect an interest-only mortgage.

• Over 50s plan. This will pay out a lump sum, but doesn’t have a term. It’s a good product to cover funeral expenses, for example.

• Family income benefit plan. This will pay out a monthly benefit, instead of a lump sum, which some people may prefer.

Q: WHAT SHOULD YOU LOOK OUT FOR?

A: Most policies should include terminal illness cover.

Some policies may also come with bereavement cover, which offers help and support to your loved ones if they were to claim on your policy.

Guaranteed insurability options allow you to amend your policy in certain circumstances without considering your current health.

Other considerations include whther to add indexation on your level term policy which will protect a lump sum against inflation by increasing the benefit on an annual basis.

Also, including waiver of premium on your term assurance policy will pay your premiums for you if you are unable to work (usually after six months of illness).

Q: WHAT ARE THE MAIN THINGS THAT MAKE THE PRICE OF LIFE INSURANCE VARY?

A: Being overweight, a heavy smoker or excessive drinking, for example, could lead to an increase in premium, as would having a job that involves working at height or using heavy machinery. Conditions such as high blood pressure, cholesterol, or asthma, for example, could also affect your premium, while more serious conditions such as having a heart attack or cancer may lead to no cover being offered at all. Age, gender and smoker status, alongside the sum assured, term of the policy and policy type (i.e. decreasing or level term) are the main variables required in order to generate a standard life assurance quote. However, health and lifestyle, higher risk occupations, hazardous pursuits and travel to higher risk countries can all have an impact on the cost of a policy.

Q: WHAT ARE THE BEST WAYS TO GET GOOD VALUE FOR MONEY ON YOUR POLICY?

A: The best way to get value for money is to speak to an adviser, who should help you get protected in the most suitable and cost effective way. However, if you’re confident you know what you want from a policy you can shop around to look for a better deal. Ensure all information provided is accurate to limit the chance of any claim being turned down.

Also, if you think there may be any health or lifestyle implications that could affect your policy, speak with a trained adviser who can research the most appropriate provider for you based on their underwriting criteria to find you the best deal.